Cost-benefit analysis of alternative tax policies on sugar-sweetened beverages in Mexico

Abstract

In 2014, Mexico implemented a tax on sugar-sweetened beverages (SSB) equivalent to one Mexican peso (MP) per liter to address the high obesity prevalence. This tax has effectively reduced SSB purchases and yielded healthcare savings; however, it remains unknown whether SSB taxes lead to net benefits at the societal level in Mexico. Moreover, public health experts recommend increasing the tax. The objective of this study is to estimate the net benefits of SSB taxes compared to a scenario of no tax in urban Mexico. Taxes include the one-MP tax and alternative higher taxes (two and three MP per SSB liter). Thus, we conducted a cost-benefit analysis from the perspective of the government, producers, and consumers for a simulated closed cohort of adults in a life-table model. We defined net benefits as the difference between economic benefits (the value of statistical life, healthcare savings, and tax revenue) and costs (consumer surplus and profit losses). We found that, at the societal level, all simulated taxes will eventually generate benefits that surpass costs within ten years. Overall net benefits can reach USD 7.1 billion and 15.3 billion for the one-MP and the three-MP tax, respectively. Hence, these benefits increased at a declining rate compared to taxes. The government and consumers will experience overall positive net benefits among society’s members. Policymakers should consider time horizons and tradeoffs between health gains and economic outcomes across different society members.