Building upon the sugar beverage tax in Mexico: a modelling study of tax alternatives to increase benefits

Abstract

IntroductionIn 2014, Mexico implemented a one peso-per-litre tax to sugar-sweetened beverage (SSB). Even though this tax reduced household purchases and predicted population health gains, the magnitude is lower compared with taxes implemented in other settings. In this study, we assessed what would happen if Mexico modified its existing tax to get higher benefits based on currently implemented taxes elsewhere.MethodsFor each tax scenario, we estimated net benefits as the difference between healthcare savings and lost jobs. We created hypothetical scenarios in which the current tax doubled or would be modified based on existing tax designs around the world including specific taxes (sugar-density or volumetric) and ad-valorem taxes.ResultsWe found that the largest benefits would correspond to a tax increase of 7.4 Mexican pesos (0.45 US dollars (USD)) per SSB litre, following the current tax in Bahrain (the highest tax rate option). This tax is predicted to yield net benefits equivalent to USD 24.7 billion after 10 years of the tax redesign. We also found that sugar-density taxes can result in larger net benefits since, in addition to reductions in consumption associated with responses to prices, they induce product reformulation. Middle-income households are the most benefited group because they reported the highest baseline prevalence of obesity and the largest price elasticity.ConclusionPolicymakers should consider pursuing a tax reform adding to the current tax, with significant increases in prices linked to a sugar-density strategy to reach a higher benefit.