Estimating the potential impact of a health tax on the demand for unhealthy food and beverages and on tax revenue in India

Author:

Varghese Beena1ORCID,Panicker Rajashree2,Mukhopadhyay Dripto3,Backholer Kathryn4,Sethi Vani5,de Wagt Arjan6,Murira Zivai5,Bhatia Neena7,Arora Monika8

Affiliation:

1. Indian Institute of Public Health, Public Health Foundation of India , Rajendra Nagar Mandal, Kismatpur, Hyderabad, Telangana 500030, India

2. Total Alliance Health Partners International, Dubai Healthcare City , Dubai 66566, UAE

3. Ascension Centre for Research and Analytics (ACRA) , 5/1, Sector 5, Rajendra Nagar, Sahibabad, Ghaziabad, UP 201005, India

4. A/P Deakin University, Geelong, Global Centre for Preventive Health and Nutrition, Institute for Health Transformation , Burwood, Victoria 3125, Australia

5. UNICEF Regional Office for South Asia , Kathmandu 5815, Nepal

6. UNICEF , New Delhi 110003, India

7. Ministry of Health and Family Welfare, Government of India , New Delhi 110011, India

8. Public Health Foundation of India , Gurgaon, Haryana 122102, India

Abstract

Abstract Foods high in fat, sugar or salt are important contributors to the rising burden of non-communicable diseases globally and in India. Health taxes (HTs) have been used by over 70 countries as an effective tool for reducing consumption of sugar sweetened beverages (SSBs). However, the potential impacts of HTs on consumption and on revenues have not been estimated in India. This paper aims to estimate the potential impact of health taxes on the demand for sugar, SSBs and foods high in fat, sugar or salt (HFSS) in India while exploring its impact on tax revenues. PE of sugar was estimated using Private Final Consumption Expenditure and Consumer Price Index data while price elasticities for SSBs and HFSS were obtained from literature. The reduction in demand was estimated for an additional 10–30% HT added to the current goods and services tax, for varying levels of price elasticities. The results show that for manufacturers of sweets and confectionaries who buy sugar in bulk and assuming a higher price elasticity of −0.70, 20% additional HT (total tax 48%) would result in 13–18% decrease in the demand for sugar used for confectionaries and sweets. For SSBs, HT of 10–30% would result in 7–30% decline in the demand of SSBs. For HFSS food products, 10–30% HT would result in 5–24% decline in the demand for HFSS products. These additional taxes would increase tax revenues for the government by 12–200% across different scenarios. Taxing unhealthy foods is likely to reduce demand, while increasing government revenues for reinvestment back into public health programmes and policies that may reduce obesity and the incidence of non-communicable diseases in India.

Funder

UNICEF

UNICEF India Country Office, New Delhi

Publisher

Oxford University Press (OUP)

Subject

Health Policy

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