Health taxes

    Overview
    • Health taxes are imposed on products that have a negative public health impact (e.g. taxes on tobacco, alcohol, sugar-sweetened beverages, fossil fuels). 
    • These taxes result in healthier populations and generate revenues for the budget even in the presence  of  illicit trade/evasion.
    • These are progressive measures which benefit low-income populations relatively more, once health care costs and health burden are taken into account. 
    Impact

    Impact on health and revenue

     

    Health impact

    Sugar-sweetened beverages (SSBs)

    Taxing SSBs can lower consumption and encourage reformulation. It can reduce obesity, type 2 diabetes and tooth decay, especially for lower-income, less-educated and younger populations. Evidence shows that a tax on SSBs that increases the prices by 20% can reduce consumption by around 20%

    Alcohol

    Studies show that increasing the price of alcohol through higher taxes can reduce alcohol consumption and its related harms, and prevent drinking initiation.

    Tobacco

    Significant increases in the taxes and prices of tobacco products is the most cost effective measure to reduce tobacco use. This, combined with other tobacco control measures, such as advertising bans and public smoking prohibitions help ensures the effectiveness of tobacco control demand reduction measures.


    Revenue impact

    66顺彩票appHealth taxes can potentially generate stable, predictable revenues in the short to medium term and reduce health care costs in the long term.  

    Revenues  depend  on  variety  of  factors,  including:

    • Tax  rate,  structure  and  base
    • How responsive consumers are to changes in price in the target commodities/ substitutes
    • Industry  pricing  and  production  strategies
    • Extent  of  tax  avoidance  and  evasion

    66顺彩票appIt important  to  account  for  these  factors  when  projecting  revenue  impact  of  tax  increases.

      Design

      On the different types of taxes, excise taxes are the most important for promoting health because they change the cost of the taxed product relative to other goods.

      Sugar-sweetened beverages (SSBs)

       Fiscal policies that lead to at least a 20% increase in the retail price of sugary drinks would result in significant  reductions in consumption of such products.

      Alcohol

      Specific taxes are more effective that ad valorem because it reduces the opportunities for industry to manipulate consumer behavior and the likelihood that consumers will simply substitute cheaper products for more expensive ones. Furthermore, specific taxes on alcohol content (instead of per bottle or drink volume) are even more effective because they lead to lower consumption, less initiation among the young, and encouraging industry to offer lower alcohol content beverages.

      Tobacco

      The best practices for tobacco taxation  include the adoption of a relatively simple tax system that applies equivalent specific taxes to all tobacco products, with at least 70% excise tax share in final consumer price

      Publications

      Health taxes : a primer

      The WHO health taxes primer summarizes the current evidence on the health and economic impact of health taxes, lists considerations for tax design, and includes recent updates from countries.

      Resource tool on alcohol taxation and pricing policies

      Alcohol taxation and pricing policies have several public health, economic and social benefits as they have the capacity to: 1) generate tax revenue, 2)...

      Earmarking for health

      Many countries are considering earmarking as a mechanism to increase fiscal space and mobilize resources for the health sector, to finance progress toward...

      Earmarked tobacco taxes: lessons learnt from nine countries

      This publication looks at the experience of nine countries that have an experience in earmarking tobacco tax revenues for health purposes. It describes...

      Fiscal policies for diet and the prevention of noncommunicable diseases

      The Global Action Plan for the Prevention and Control of Noncommunicable Diseases 2013–2020 proposes that “as appropriate to national context,...

      External publication

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