Imperial College London

Taxes on soft drinks, alcohol and tobacco are of most benefit to the poor

by

image

Taxes on tobacco, alcohol, sugar-sweetened drinks and snack foods may benefit poorer households the most, according to new research.

The study led by Professor Franco Sassi, Professor of International Health Policy & Economics at Imperial College Business School is one of five papers published today in The Lancet which collectively argue that taxes are a powerful response to rising rates of chronic diseases and an inescapable solution to tackling non-communicable diseases (NCDs)[1].

In his paper, based on data from 13 countries, Professor Sassi, the Director of the Centre for Health Economics & Policy Innovation, argues that while changing the price of unhealthy products alters consumption across the board, the impact differs due to socioeconomic status. The greatest health benefits from tax rises can be seen for people on a low income as they respond the most to price changes, and suffer disproportionately from chronic diseases.

The research shows that whilst wealthier households may face a bigger overall increase in expenditure when prices change, the burden is greater on lower income households because it represents a greater share of their overall spending.

“No amount of money, however small, is trivial for low income households, especially in low income countries." Professor Franco Sassi

The main focus of the research is on low and middle-income countries, but most of the findings are relevant for all countries, including the United Kingdom.

Professor Sassi, said: “No amount of money, however small, is trivial for low income households, especially in low income countries. But the extra tax expenditures involved should not deter governments from implementing a policy that may disproportionately benefit the health and welfare of lower-income households.”

He continued: “Governments must carefully assess the available evidence from their own countries and look at the tax system as a whole, including investing tax revenue in “pro-poor” programmes or subsidising healthy alternative products.”

According to Professor Sassi, the Soft Drinks Industry Levy that comes into force in the UK on Friday 6 April, will make the greatest difference to the poorest consumers. He said: “Lower income households are the heaviest consumers of sugar-sweetened drinks and have the highest risk of obesity, diabetes and other chronic diseases. The new sugar levy will go a long way to helping poorer people become healthier and should also ease the burden of chronic diseases on the NHS. The extra tax burden it will involve for the poor is very small.”

'Sin' taxes around the globe 

Professor Sassi’s paper looks at data from across the world on the impact of taxes on soft drinks, alcohol and tobacco.

In Mexico a soft drinks tax was introduced in 2014 and purchases of taxed drinks reached a 12% reduction by December of that year.

This means that the average person was drinking more than four litres less of sugar-sweetened drinks that year and the greatest change was in the poorest households. 

Professor Sassi and co-authors also model the impact of tax increases in different countries, and argue that any negative financial impacts can be mitigated by a “pro-poor” use of the revenues generated.

The papers published today in The Lancet represent the most comprehensive analysis to date of evidence on expenditure, behaviour, and socio-economic status.

Bringing together data from across the globe, the five papers present strong evidence that taxes on unhealthy products have the potential to produce major health gains among the poorest in society who are disproportionately affected by diseases such as cancer, heart disease and diabetes. The evidence helps counter fears that such taxes will necessarily disproportionately harm the poor.

Non-communicable diseases (NCDs) such as cancer, heart disease and diabetes are responsible for 38 million deaths each year, 16 million of these are among people aged under 70. The Sustainable Development Goal NCD target (SGD 3.4) is to reduce deaths from NCDs by a third by 2030 and promote mental health.

“Non-communicable diseases are a major cause and consequence of poverty worldwide,” says Dr Rachel Nugent, RTI International (Seattle, USA) and Chair of The Lancet Taskforce on NCDs and economics. “Responding to this challenge means big investments to improve health care systems worldwide, but there are immediate and effective tools at our disposal. Taxes on unhealthy products can produce major health gains, and the evidence shows these can be implemented fairly, without disproportionately harming the poorest in society.”

The Lancet Taskforce on NCDs and economics is a partner of the WHO’s Independent High-Level Commission on NCDs and will be launched at the WHO NCD Financing meeting in Copenhagen (9-11 April).

Professor Sassi’s paper: “Equity impacts of price policies to promote healthy behaviours” is among the embargoed papers, which can be accessed on the links below:

For access to the Comments and Articles, please see:

http://www.thelancet-press.com/embargo/NCDtaskforce.pdf

For  access to the Appendices, please see:

http://www.thelancet-press.com/embargo/NCDtaskforceAPPX.pdf                                   


[1] The target (SGD 3.4) is to reduce deaths from NCDs by a third by 2030 and promote mental health.

See the press release of this article

Reporter

Laura Singleton

Laura Singleton
Communications and Public Affairs

Click to expand or contract

Contact details

Tel: +44 (0)20 7594 6127
Email: l.singleton@imperial.ac.uk

Show all stories by this author

Tags:

Health-policy
See more tags