“Excise taxes are relatively simple to implement, and most governments already levy them on tobacco products and alcoholic beverages, while an increasing number are doing the same with sugary beverages. The empirical evidence on the effectiveness and cost-effectiveness of these taxes in reducing consumption and its consequences is well established for tobacco and alcohol use and is emerging for sugary beverage consumption.”

– Chaloupka and Powell, 2018

INTRODUCTION

Imagine you’re on your way to the grocery store to buy a case of your favorite soda. When you get to the cash register, you realize that the price of soda has increased by 20% since the last time you went shopping. You discover that this is due to a new health tax imposed by the government on all sugar-sweetened beverages. Do you still buy it?

For many individuals, the answer will be no – and that’s exactly what public health professionals want. Worldwide, taxes are being imposed on a number of unhealthy consumer products in an attempt to decrease consumption and improve the overall health of populations. While many are applauding these moves as effective strategies to decrease the incidence of non-communicable and chronic diseases, others are skeptical of their social and economic benefits. 

In this blog post, we’ll be discussing:

• What are health taxes?
• Public health benefits of health taxes
• Criticism and opposition to health taxes: why they don’t add up

What are health taxes?

Health taxes are imposed on products that are seen as having a negative health benefit. The purpose of these taxes is to increase the costs of manufacturing, distributing, and/or consuming these products to disincentivize production and consumption (Wright, Smith, & Hellowell, 2017). As such, they may discourage producers from increasing production and/or consumers from increasing consumption. 

Several countries around the world have implemented health taxes on a number of different products in a bid to improve the health of their populations. In Brazil, the government used a tobacco tax to increase the real price of cigarettes by 33 percent between 2012 and 2016 (The Task Force on Fiscal Policy for Health, 2019). Russia and Colombia have also successfully levied taxes on alcohol, and Mexico even introduced a tax on sugary beverages in 2014 (The Task Force on Fiscal Policy for Health, 2019). 

The World Health Organization (WHO) officially endorses the implementation of taxes on sugar-sweetened beverages, alcohol, and tobacco to disincentivize the use of these products. In its 2019 Health Taxes Primer, the WHO claims fiscal policies that increase the retail price of sugar-sweetened beverages by 20 percent have been shown to decrease consumption by a significant margin (World Health Organization, 2019). They also suggest that cigarette consumption can be decreased by between four and five percent by increasing their price by just 10 percent (World Health Organization, 2019). 

Public health benefits of health taxes

Many experts have welcomed the use of taxes as public health tools for their ability to reduce the incidence of non-communicable and chronic diseases among populations. Non-communicable diseases (or diseases that are not transmitted between individuals) kill more than 41 million people every year, making them the leading global cause of death (The Task Force on Fiscal Policy for Health, 2019). 

It is estimated, however, that more than 10 million of these annual deaths could be prevented by reducing consumption of just three products (The Task Force on Fiscal Policy for Health, 2019):

• Tobacco: about 8 million people die from tobacco use or exposure every year, accounting for 13% of global deaths;
• Alcohol: almost 3 million people die from alcohol consumption every year, accounting for 5% of global deaths;
• Processed foods with added sugars: over 4.5 million people die every year from being overweight or obese (Collaborators GRF, 2018)** and 1.5 million die from diabetes (World Health Organization, 2022). 

Taxes that target these products are beneficial not only to population health, but to the economy as well. The economic costs of smoking, measured in both productivity losses and treatment costs, were estimated at over USD$1.4 trillion in 2012 – the equivalent of 1.8% of global GDP (Goodchild et al., 2018). Alcohol consumption was found to be costly as well, generating annual economic costs equivalent to over 1% of GDP in middle- and high-income countries (Goodchild et al., 2018). Using taxes as a method to disincentivize these behaviors would therefore improve long-term economic outcomes. 

Criticism and opposition to health taxes: why they don’t add up

Though most public health experts have shown support for health taxes, others have not looked upon them quite as highly. 

Those who produce the products targeted by health taxes have been vocal in their opposition to the policy. Many claim that raising excise taxes reduces revenues by disincentivizing consumption, leading to economic losses (The Task Force on Fiscal Policy for Health, 2019). Others also allege that they result in unemployment and impact disproportionately on those living in poverty (The Task Force on Fiscal Policy for Health, 2019). 

However, evidence has proven these claims to be rather insignificant in the grand scheme of things. Tax increases on tobacco and alcohol products have been shown to increase rather than reduce tax revenues, and there is no evidence to suggest that they lead to higher societal levels of unemployment (The Task Force on Fiscal Policy for Health, 2019). As for the impact on those who live in poverty, studies show that the health benefits for this group are especially significant as lower-income households tend to be more responsive to price changes (The Task Force on FIscal Policy for Health, 2019). 

This evidence all suggests that the benefits of health taxes far outweigh the costs. While they may impact negatively on certain industries, their impact on society as a whole is overwhelmingly positive – both in terms of economic and public health outcomes.

Conclusion

While perhaps not to everyone’s liking, health taxes are a proven and cost-effective tool in the everlasting mission to improve population health outcomes, especially when it comes to reducing the incidence of non-communicable diseases. In this blog post, we’ve discussed:

• Health taxes and how they are used around the world
• The public health benefits of levying health taxes on products that increase the risk of developing a non-communicable disease
• Criticisms of health taxes and why they don’t necessarily outweigh the benefits

Written by: Claire Borgaonkar, BPAPM (c)