We estimate the price and consumption effects of the 2012 French tax on sweetened non-alcoholic drinks using a difference-in-difference approach. Our identification strategy exploits Italian data as a natural control group. We use French and Italian Consumer Price Indices, purchase prices and quantities from the 2011 and 2012 Kantar and GfK home-scan surveys for two French regions and two neighbouring Italian regions, and expenditure data from the 2011 and 2012 Italian Expenditure Survey. We check for the robustness of our results by applying the difference-in-difference models using only French data and considering water as the benchmark (control) good. We find that the tax is transmitted to the prices of taxed drinks, with full transmission for soft drinks and partial transmission for fruit juices. The evidence on purchase responses is mixed and less robust, indicating at most a very small reduction in soft drink purchases (about half a litre per capita per year), an impact which would be consistent with the low tax rate. We find suggestive evidence of a larger response by the sub-sample of heavy purchasers. Fruit juices and water do not seem to have been affected by the tax.
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