When using taxes to promote healthier diets, policymakers are faced with considerations such as what products to tax, what type of tax to implement and what substitutes or market alternatives are available if consumers indeed stray from newly taxed items.
In 2015 the World Health Organization assessed several different country examples of fiscal policies on sugary beverages — as well as food with high sugar and salt content — in response to member states requests for a guide to help them design their own tax policies to promote healthier food and beverage consumption.
“Part of the reasons why we had to do the review [was] because countries were saying, if it has worked for tobacco, shouldn’t it work if we move to food products and beverages?” said Temo Waqanivalu, technical lead on diet and physical activity at WHO in Geneva.
Of the examples reviewed by WHO and captured in its new report, fiscal policies on sugary beverages bore the strongest evidence when it came to making an impact.
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In January 2014, for example, the Mexican government decided to tax producers or retailers of nonalcoholic beverages with added sugar. This led to a 12 percent decline in purchases of these beverages by December 2014, according to a study by the Mexican Public Health Institute and the University of North Carolina.
A smart tax policy to promote healthy diets, however, first requires a number of considerations. Waqanivalu shared with Devex a few pieces of advice to help policymakers identify the right products to tax, have a better understanding of the different tax types and how they impact consumer behavior, and ensure consumers are making healthier choices after the tax policy is implemented.
1. Take advantage of WHO’s country nutrient profile models.
While WHO reviewed other tax policies, such as those focused on fatty food or food items with high salt content, Waqanivalu noted there were more country experiences taxing sugary drinks and beverages.
This is likely because sugary beverages hold little nutritional value, so imposing taxes on them is easier as opposed to food items that contain a whole range of nutrient values or ingredients. In the latter case, taxing becomes more complex, as countries need to consider not just the sugar, but also salt content of a food item, for example.
To effectively manage these complexities, countries can make use of WHO’s nutrient profile models, a tool that defines what food items should be marketed and taxed based on that item’s nutritional composition. Each WHO region has one for marketing purposes, and Waqanivalu suspects this could be applied as a guide when countries decide what food items to tax so “countries don’t need to develop their own standards if they cannot,” the doctor said.
2. Specific excise tax is better than ad valorem tax.
A specific excise tax is tax placed on a specific product based on its size and volume. For example, 1 Mexican peso for every liter of nonalcoholic beverages with added sugar. Ad valorem tax, meanwhile, is tax based on a product’s value: 8 percent tax added on the sale of imported chocolates or candies, for example.
The problem with the latter when used in promoting healthier diets is that consumers may just decide to buy cheaper options, not healthier ones.
This is already a problem in countries such as Thailand, where some sugary beverages are cheaper and are more affordable even with tax. A 440-milliliter beverage without sugar in Thailand is taxed at $0.025, while a sugary beverage with an equivalent volume has a cheaper tax rate of $0.012, according to WHO.
3. Identify healthier, safe drinking options.
Preventing populations from consuming sugary beverages is not the only thing policymakers need to focus on. Making the sale of these products unattractive to consumers should be followed with available healthier options.
This means making sure safe drinking water, for example, which Waqanivalu said is one of the best substitutes for sugary beverages, is available to deter consumers from continuing to buy the same beverages countries are taxing for lack of other safe options.
This reveals some of the added considerations policymakers must consider when promoting healthier diets as opposed to preventing the consumption of tobacco products.
“You either smoke cigarettes or you don’t, whereas for food taxes, if you select certain drinks, the population could just mainly sift through what could possibly be cheaper but much unhealthier drink,” Waqanivalu said.
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