Levying taxes on sugary drinks

Why African countries need reliable local data on sugary drinks tax revenue, VAT, corporate tax and customs duty revenue

COMMENT | AGNES ERZSE AND KAREN HOFMAN | Professor and Programme Director, SA MRC Centre for Health Economics and Decision Science – PRICELESS SA (Priority Cost Effective Lessons in Systems Strengthening South Africa), University of the Witwatersrand

Diets in sub-Saharan Africa are changing as more countries advance from low-income to middle-income status. People’s eating habits are shifting from food rich in starchy staples, vegetables and fruits to a more westernised diet high in sugar, saturated fats and oils. This shift to unhealthy foods is fuelling obesity related chronic, noncommunicable conditions such as heart disease, diabetes and cancer.

Preventive measures are more critical than ever to curtail this tsunami that is overwhelming health systems.

One area that must adjust is the food and beverage sector in sub-Saharan Africa. The processed food industry is promoting the region as a growth market for its products.

To discourage consumption and reduce health risks, an increasing number of low- and middle-income countries have imposed taxes on sugar-sweetened drinks. Across the globe and especially in Latin America and the Caribbean, taxing sugary drinks to reduce consumption has been effective.

The World Health Organisation (WHO) has called on African governments to follow this example, and to ease the burden of noncommunicable diseases.

In 2015, a WHO panel of public health experts found that: “appropriately designed taxes on sugar-sweetened beverages would result in proportional reductions in consumption, especially if aimed at raising the retail price by 20% or more”.

Some African countries such as South Africa, Botswana and Zambia already tax sugary drinks. But others have been slow to act. The WHO attributes this, in part, to evidence gaps.

Credible local data are essential to determine what taxes can and cannot achieve.

We wanted to get an understanding of what data are available to support the design, implementation, monitoring and evaluation of a sugary drinks tax. We focused on seven sub-Saharan African countries: Botswana, Kenya, Namibia, Rwanda, Tanzania, Uganda, and Zambia. These economies are growing and their marketing industries are low-cost. Regulation of unhealthy commodities is also weak.

In combination, these factors represent a growth opportunity for the industry. They will also fuel diet-related noncommunicable diseases.

Our research highlighted the urgent need for new indicators on unhealthy diets, including sugary drinks consumption and purchase patterns. Without this evidence, countries might underestimate the consumption figures. They might then miss the potential of sugar-sweetened drinks taxation as a public health intervention.

We interviewed stakeholders such as representatives from government agencies, including those in health, commerce, development, agriculture, education and academia. All individuals underscored the importance of local evidence on sugary drinks consumption and purchasing behaviours, as well as fiscal evidence to compare the cost and benefits of a tax. This is because policymakers need to take into account evidence for coherent economic arguments to discuss sugar-sweetened drinks taxes in policy circles.

The potential health benefits, the revenue of such a tax, as well as the monitoring and evaluation of its implementation, requires appropriate baseline data at the outset particularly across income levels, and age groups.

Our study highlights that such information is missing in all seven countries.

We looked at a range of publicly available data sources to establish the rate of sugary drinks consumption and the impact on people’s health.

We found that national survey data does not adequately track either the intake of sugar-sweetened drinks, or household spending. Fiscal data is lacking regarding sugary drinks tax revenue, value added tax from sugary beverage sales, and the corporate income tax and customs duty revenue.

Accurate information on the soft drinks industry was not easily accessed either. Unlike in countries such as Mexico, it was difficult to find information on a number of fronts. The number of companies in industry sectors, beverage industry forecasts, drinks prices, package sizes, number of low- or no-calorie beverages, and sugar content were unavailable.

Kenya, Zambia, Rwanda, Tanzania and Uganda had taxes on non-alcoholic beverages. But only Zambia had a differential sugar-sweetened beverages tax – 3% on imported beverages and 0.5% on local drinks. Botswana recently introduced a tax that is very similar to the health promotion levy in South Africa.

Going forward

Timely, easily understood, concise, and locally relevant evidence is needed to inform policy development on sugary drinks. The relevant data are drawn from multiple sectors. Cross-sector collaboration is, therefore, needed.

Indicators to measure sugar-sweetened drinks and added sugar consumption should be developed. These must be included in current data collection tools such as national income dynamics studies. This would ensure monitoring and evaluation of taxation.

There’s no consensus on how best to capture data for new indicators. But a useful point of departure would be to complement existing data sources. These include population-based surveys that ask questions related to sugary drinks taxation. This would lead to improvement in tracking the intake of sweet drinks, and the effectiveness of taxation.

Establishing robust, accurate baseline data to inform evidence could enable governments to accelerate political and public support for sugar-sweetened beverage taxation and related policies. Finally, greater transparency of industry data is essential.

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Agnes Erzse is a Researcher, SAMRC/Centre for Health Economics and Decision Science- PRICELESS SA, University of the Witwatersrand and Karen Hofman is Professor and Programme Director, SA MRC Centre for Health Economics and Decision Science – PRICELESS SA (Priority Cost Effective Lessons in Systems Strengthening South Africa), University of the Witwatersrand.