🌎 What do the Argentinian “Impuesto Interno a los Cigarillos” (internal tax on cigarettes), the Colombian “Impuesto a las Bebidas Ultraprocesadas Azucaradas” (tax on ultraprocessed sugar-sweetened beverages) and the new Brazilian “Imposto Seletivo” (selective tax) have in common?
These are what the World Health Organization would call “health taxes”: excise taxes levied on products that have a negative public health impact. The WHO says that health taxes “[target] specific products that are proven to be unhealthy or harmful to health and aim to increase their relative price to make them less affordable therefore reducing their consumption and preventing or mitigating these negative health outcomes.” The Organization considers these taxes to be so-called “win-win-win” policies because:
💡 “They save lives”
💡 “[They] prevent disease while advancing health equity” and
💡 “[They mobilize] revenue for the general budget.” (https://bit.ly/4fEYL3W)
This comes from a recently released OECD – OCDE report titled “Revenue Statistics: Health Taxes in OECD Countries” (https://bit.ly/3ZiOPXW). You can see on p. 42 that in 2022 health taxes represented a relatively modest part of GDP in LatAm OECD countries, with Colombia showing the highest share of GDP at close to 0.6%. Mexico’s health taxes represent the highest percentage of total tax revenues in the region (at around 3%). These calculations take into account the excise tax revenues levied on tobacco, alcohol and sugar-sweetened beverages.
The problem with health taxes (and the OECD touches only very lightly on this point in this report and in another recent study about tobacco taxation in the LAC region – https://bit.ly/3YS1UWM) is that there is a clear “tension” between (a) the inductive purpose of these taxes and (b) their revenue-raising potential (p. 37). What is the true objective of a tax on cigarettes? Is it to tax cigarettes to the point that they are no longer purchased or is it to achieve a “sustainable” level of tax so that smokers continue to smoke while the local Treasury rakes in the cash? There is nothing in the report that suggests that government authorities should use the funds collected by “health taxes” solely on efforts to address the public health implications of the consumption of whatever harmful product is being taxed (hence the WHO’s reference to the “general” budget).
Does this mean that taxation is a poor instrument to correct externalities associated with the consumption of certain products? No. What it means is that policymakers – and the public in general – should be aware of the “competing” goals of so-called health taxes and the true motivations of government authorities in either promoting or increasing them. It is not necessarily the case that a tax increase on sugar-sweetened beverages is motivated by an intent to reduce their consumption – it may well be the case that the increase has been fine-tuned to preserve it (and therefore raise revenues from it).
