Taxing sugar and public health

The global obesity epidemic has left governments and other stakeholders scrambling for effective solutions. Few countries to date have gone beyond mild actions in tackling obesity, unhealthy diets and physical inactivity; all major triggers of diabetes, ischaemic heart disease, stroke and cancer. Yet the economic crisis has heightened concerns about the long term sustainability of healthcare systems. At any time, an obese person incurs at least 30% higher medical expenditure than someone of a healthy weight. Fiscal measures have a legitimate place in the public health policy toolkit, and several countries have chosen to use taxes on foods and non-alcoholic beverages in an attempt to improve the quality of people’s diets and curb the spread of obesity. Mexico was one of the latest to join this group, when in 2014 it launched a comprehensive strategy to fight an obesity problem that has reached extraordinary proportions. The Organisation for Economic Co-operation and Development and World Health Organization had estimated in 2010 that a similar strategy could save about 160,000 disability adjusted life years in Mexico annually. Mexico is also one of the top consumers of sugar worldwide, as well as a top producer and exporter. The strategy includes taxes on sugar sweetened beverages and on calorie-dense foods.

In a recent publication in the BMJ,¹ Colchero et al report the first, much anticipated, empirical evaluation of the early impacts of Mexico’s excise tax on sugar sweetened beverages. The study is not based on the estimation of a full demand system, which we may expect to see in the future, but on a pragmatic difference in approach, relative to a counterfactual extrapolated from past trends. Purchases of taxed beverages in urban areas in Mexico declined more than expected (on average 4.2 fewer litres per year, or 6% of all purchases of taxed beverages), while purchases of untaxed beverages increased (12.8 litres more than the counterfactual). Reductions in purchases of sugar sweetened beverages were larger and increased over time for consumers of lower socio-economic status.

These results are important for governments that are using taxes on sugar sweetened beverages as part of their public health strategies, and those considering doing so. The study shows that consumers respond to price changes that taxes can produce, contributing to a large evidence base. However, other outcomes are not fully explored. Whether consumers’ reactions will lead to a healthier diet depends on how taxes are designed and what selection of products they target. Despite evidence of an increase in purchases of untaxed beverages, especially bottled water, the full extent of substitutions made by Mexican consumers is not known. We also do not know from the study whether the Mexican tax of one peso per litre is large enough to achieve meaningful health benefits. To assess this, population models are needed.

However, as the BMJ points out, other complementary policies are also needed. This includes regulatory measures such as nutrition labelling, regulation of health claims and advertising, health education based on a behavioural understanding of the food choices of consumers, incentives for research and development in food production, voluntary initiatives with agreed targets and independent monitoring, changes in the environment of food choice, and counselling by general practitioners of people at higher risk. Taxes do have a place in a broader strategy in countries facing harm from unhealthy diets, but having to make people pay for their potentially unhealthy consumption choices should not be considered a success for public health. The BMJ points out that if all of the above policies were used systematically and effectively, the focus of the policy debate might shift away from taxes in the future.

Reference

1. Colchero MA, Popkin BM, Rivera JA, Ng SW.  Beverage purchases from stores in Mexico under the excise tax on sugar sweetened beverages: observational study. BMJ 2015; 351:h6704. 10.1136/bmj.h6704