Designing a food tax to impact food-related non-communicable diseases: the case of Chile

Food Policy. 2017 Aug;71:86-100. doi: 10.1016/j.foodpol.2017.08.001. Epub 2017 Aug 8.

Abstract

The global shift towards diets high in sugar-sweetened beverages (SSBs) and energy dense ultra-processed foods is linked to higher prevalence of obesity, diabetes and most other noncommunicable diseases (NCDs), causing significant health costs. Chile has the highest SSB consumption in the world, very high junk food intake and very rapid increases in these poor components of the diet plus obesity prevalence. This study's purpose is to compare the effect of different tax schemes for SSBs and ultra-processed foods on nutrient availability, utilizing price-elasticities, which are estimated from a Quadratic Almost Ideal Demand System model, using the 2011-2012 Income and Expenditure survey. We take into account the high proportion of households not purchasing various food and beverage groups (censored nature of data). The food groups considered were: sweets and desserts; salty snacks and chips; meat products and fats; fruits, vegetables and seafood; cereals and cereal products; SSB ready-to-drink; SSB from concentrate; plain water, coffee and tea; and milk, which together represent 90% of food expenditures. The simulated taxes were: (1) 40% price tax on SSBs(22% above the current tax level); (2) a 5 cents per gram of sugar tax on products with added sugar; and (3) 30% price tax on all foods(27% above current tax levels) and beverages (12% above the current tax level) exceeding thresholds on sodium, saturated fat, and added sugar and for which marketing is restricted (based on a Chilean law, effective June 16 2016). Unhealthy foods are price-elastic (-1.99 for salty snacks and chips, -1.06 for SSBs ready-to-drink, and -1.27 for SSBs from concentrate), meaning that the change in consumption is proportionally larger with respect to a change in price. Results are robust to different model specification, and consistent among different socioeconomic sub-populations. Overall, the tax on marketing controlled foods and beverages is associated with the largest reduction in household purchases of sodium, added sugar, saturated fat and calorie purchases. Chile is unique in currently having instituted a small current SSB tax as well as marketing controls and front-of-package labeling of unhealthy foods and beverages. The design of a larger, more comprehensive tax to enhance the overall effect of these policies on healthier diets is a next critical step. This study shows that a large tax on the same foods and beverages already delineated as unhealthy by the marketing controls and front-of-pack labeling should prove to be more effective for promoting a healthier diet.

Keywords: Junk food tax; Price elasticity; SSB tax; almost ideal demand system; food tax options; nutrient tradeoffs.