Sweet tax

Mexico's tax on sugar-sweet­ened bev­er­ages has pos­i­tively im­pacted public health. In­dia too im­poses huge taxes, but not with the pur­pose of com­bat­ing sugar and re­lated ill­nesses


In­dia is yet to tax sug­ary bev­er­ages ef­fec­tively to im­prove public health as Mexico has done

I2013, a stun­ning ban­ner on N EARLY Mexico’s streets and sub-way sta­tions took ev­ery­one by sur­prise—a poster with 12 tea­spoons of sugar against a bot­tle of cola, ask­ing peo­ple in bold letters if they wish to con­sume that much sugar.The poster was part of a public in­ter­est cam­paign to tax sugar-sweet­ened bev­er­ages (ssbs), as per capita con­sump­tion of ssbs had jumped a whop­ping 60 per cent in 17 years. Mex­i­cans were con­sum­ing an an­nual av­er­age of 163 litres of sugar-sweet­ened drinks per per­son.Not sur­pris­ingly, 38 per cent of Mexico’s pop­u­la­tion is obese.The top dis­eases in 2013 were car­dio­vas­cu­lar and di­a­betes, lead­ing to 145,237 and 87,245 deaths re­spec­tively.The Mex­i­can gov­ern­ment fi­nally clamped down on the con­sump­tion of ssbs.

A spe­cial ex­cise tax of 10 per cent was levied on ssbs on Jan­uary 1, 2014. ssb tax is an ad­di­tional or spe­cial ex­cise duty levied on the vol­ume of sugar-sweet­ened drinks, over and above other ba­sic taxes that are levied on goods.The hike in tax is usu­ally given as an in- dica­tive name—soda tax or ssb tax—and is ac­com­pa­nied by a dec­la­ra­tion or a public health mes­sage, even cam­paign com­po­nents.

The re­sults of ssb tax have been pos­i­tive so far. A re­cent brief by the Mexico health depart­ment says ssbs sales dropped by 12 per cent by De­cem­ber, 2014. Global stud­ies in­di­cate a con­sump­tion de­cline af­ter the im­po­si­tion of sugar taxes. A study by a Euro­pean re­search firm, re­veals that de­mand for soft drinks de­clined in France, Fin­land and Hungary be­tween 2011 and 2013 af­ter the in­tro­duc­tion of ssb tax.The 2014 who’s Ev­i­dence on Nutri­tion Ac­tions also re­ports a de­cline of ssb sales glob­ally, though the rise in con­sump­tion comes from low and mid­dlein­come coun­tries in Asia and Latin Amer­ica.

Pro­hib­i­tive tax­a­tion

The ssb tax was a re­sult of a sus­tained cam­paign by the Mex­i­can gov­ern­ment, backed strongly by lo­cal non-prof­its. “Bev­er­age man­u­fac­tur­ers fought back. The academia and ngos too re­sponded. Now, more peo­ple

are aware of the neg­a­tive health ef­fects of soda and ssbs,” says Si­mon Bar­quera, di­rec­tor, nutri­tion pol­icy re­search, Na­tional In­sti­tute of Public Health, Mexico. The tax may not have com­pletely solved a multi-fac­to­rial prob­lem like obe­sity, but the re­sults re­veal there will be sig­nif­i­cant im­pact on public health, he adds.

The cam­paign has co-ben­e­fits too. “Mexico faces acute scarcity of safe drink­ing wa­ter and many schools and house­holds are not even linked to the ba­sic sup­ply chain,” says Bar­quera.The rev­enue from the ssb tax has been ear­marked to pro­vide drink­ing wa­ter in schools and in­stalling drink­ing wa­ter foun­tains across the coun­try. With de­mands now brew­ing to hike the tax to 20 per cent— as per who rec­om­men­da­tions—Mexico has set an ex­am­ple.

The con­cept of the ssb tax isn’t new. Nor­way and Samoa have added small, but ex­tra quan­tum of tax on sug­ary drinks and con­fec­tionary items. Fin­land in­tro­duced a tax on sug­ary drinks in 2011. France in­tro­duced a sugar bev­er­age tax in 2012 and fur­ther hiked it in 2013 to in­clude energy drinks such as Red Bull. Hungary and Berke­ley, usa ,too tax sug­ary food and bev­er­ages.

Pol­icy paral­y­sis 2.0

While coun­tries across the world are us­ing the pre­cau­tion­ary prin­ci­ple to tax sug­ary bev­er­ages, In­dia still is slowly wak­ing up to the health haz­ards of sugar drinks. The 2013 Global Bur­den of Dis­ease re­port states that In­dia is among the top 10 coun­tries in the world bat­tling obe­sity and the coun­try is also the ‘di­a­betes cap­i­tal’ of the world (see ‘Sugar bub­bles’).

In its in­terim bud­get in 2014,the Union gov­ern­ment levied a five per cent ad­di­tional ex­cise duty hike on aer­ated and sug­ary wa­ters (apart from the stan­dard 12 per cent duty). In this year’s bud­get, this ad­di­tional ex­cise was re­moved and a ba­sic ex­cise of 18 per cent (in­clud­ing a fresh hike of 0.5 per cent in both stan­dard and ba­sic ex­cise) was in­tro­duced.The hike was on wa­ters, min­eral wa­ters, aer­ated and sug­ary drinks.The cur­rent ex­cise not only clubs pack­aged drink- ing wa­ter in its am­bit, but is also levied on the mrp of the prod­uct, rather than the vol­ume (as is in the case of Mexico).

In ad­di­tion, the tax doesn’t nec­es­sar­ily trans­late into a price hike on all avail­able vol­umes of soft drink bot­tles, as is demon­strated in the case of to­bacco, which the gov­ern­ment is at­tempt­ing to pro­hibit. Though Fi­nance Min­is­ter Arun Jait­ley said in his bud­get speech that the hike is for public and fis­cal health, its po­si­tion­ing as a ded­i­cated “soda tax” isn’t clear. Bev­er­age com­pa­nies did raise a brouhaha about in­creased costs, and then ev­ery­thing went back to nor­mal.

“If the gov­ern­ment wants to pro­hibit con­sump­tion, the duty at both Cen­tre and state lev­els should be more than 20 per cent at least,” says a mem­ber of the Cus­toms Ex­cise & Ser­vice Tax Ap­pel­late Tri­bunal.An ex­cise depart­ment of­fi­cer says the fact that pack­aged wa­ter is in­cluded in the ex­cise duty in­di­cates that the gov­ern­ment isn’t look­ing to ad­dress sug­ary drink con­sump­tion is­sue. Ex­perts say gen­er­at­ing money through this tax can help the 103.8 mil­lion peo­ple who do not have ac­cess to safe drink­ing wa­ter. Mean­while, cost of pack­aged drink­ing wa­ter re­mains high—`10-12 for a 500 ml bot­tle.

“The term “health-re­lated food duty” is rec­om­mended as it con­veys the health pur­pose of the pol­icy and the no­tion of re­spon­si­bil­ity un­der­pin­ning the pay­ment on du­ties on goods that con­trib­ute to so­cial harms,” states a re­port of the UK’s Na­tional Heart Fo­rum. When it comes to public health tax­a­tion, there must be a multi-pronged ap­proach, and a duty hike must be ac­com­pa­nied by aware­ness pro­grammes and public health advertising, be­lieves Mon­ica Arora, di­rec­tor, Public Health Foun­da­tion of In­dia (phfi). “When you put a la­bel, you send a mes­sage to the public that it is bad for health. For in­stance, the ban on gutkha was ac­com­pa­nied by sev­eral public health mes­sages,” she says.

A 2014 study by Stan­ford Univer­sity and phfi em­pha­sised that a 20 per cent ssb tax in In­dia (over and above the ex­ist­ing ex­cise duty) is likely to pre­vent 11.2 mil­lion new cases of over­weight and obe­sity and 0.4 mil­lion cases of type 2 di­a­betes be­tween 2014-2023. The Union gov­ern­ment needs to swal­low some sugar-coated medicine if it is se­ri­ous about pro­tect­ing peo­ple’s health.

Rev­enue from the tax has been ear­marked

to pro­vide drink­ing wa­ter in schools and in­stalling drink­ing wa­ter foun­tains in Mexico

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