1 HRF Help Desk Request
Title: Taxation for NCD Prevention in the Pacific
Short evidence paper on experience with taxes on unhealthy products to supplement the NCD Roadmap Report
Authors: Dr Gary Sacks and Prof Boyd Swinburn – Deakin University
Acknowledgements: Dr Wendy Snowdon provided great assistance in identifying documents to include in this report
Date: 1 July 2014 Document purpose
Pacific Island countries and territories are in the grip of a non-communicable diseases (NCD) crisis, and efforts to promote healthier diets and lifestyle are critical. The World Health Organization (WHO), the Secretariat of the Pacific Community (SPC) and the World Bank have drafted the NCD Roadmap Report as a background document on preventing and controlling NCDs in the Pacific in preparation for the Pacific Islands Forum Economic Ministers’ Meeting (FEMM). Their report provides an extensive summary of the evidence on the best-buys for NCD control, a suggested roadmap for a country and regional response to the NCD crisis in the Pacific, and highly practical considerations for implementing recommended measures.
This document is designed to supplement the NCD Roadmap Report by expanding on issues identified in the NCD Roadmap Report with respect to taxation and/or levies on tobacco, alcohol and unhealthy foods and beverages. In particular, this document extends the discussion on successes and lessons learned within the Pacific region with respect to taxation in this area. The aim is to highlight practical implementation lessons that might prove helpful for Solomon Islands.
Introduction
As identified in the NCD Roadmap Report, growing NCD burdens, combined with modest economic growth, will inevitably further squeeze Ministry of Health and national development budgets unless urgent action is taken now. Fortunately, many NCDs are preventable, or their health and financial burdens can at least be postponed. However, simply spending money on broad health awareness and generalised health promotion is unlikely to be effective by itself.1 Instead, as identified in the NCD Roadmap Report, health promotion campaigns need to be supplemented by proven, affordable, and cost-effective interventions, including taxation of tobacco, alcohol and unhealthy foods and beverages (including soft drinks), amongst other options.
2 Tobacco taxes
Raising the price of tobacco (and then adjusting it to keep pace with inflation) is one of the most strategic interventions and ‘best-buys’ to reduce NCDs.2 Increasing, and then maintaining, the real price of tobacco taxes has multiple benefits: it reduces consumption amongst existing smokers and reduces uptake of tobacco (particularly amongst the poor and the young), whilst simultaneously generating extra revenues for government.1 The rationale for raising tobacco taxes, and practical implementation considerations are outlined in great detail in the NCD Roadmap Report.
While noted in the NCD Roadmap Report, it is worth stressing that when excise duties are raised, Pacific Island countries need to respond to a possible switch to home grown, informally marketed, loose tobacco leaf.1 Specifically, governments need to monitor that local smallholders do not increase growing of local tobacco leaf. In addition, governments are likely to need to employ additional inspectors to ensure compliance of new excise rates at customs borders and in small local trade stores. As noted in the NCD Roadmap Report, employment of additional inspectors should be revenue generating over the short to medium term as they improve compliance with the increased excise duties.
Very visible, high-level support for tobacco taxes is recognised in the NCD Roadmap Report as an important success factor in maintaining public support for these measures. The recent case of Palau demonstrates this point. There, celebrations for World No Tobacco Day on 31 May had the theme of ‘Raise Tobacco Taxes’. President Thomas E. Remengesau Jr. attended a walkathon as part of the celebrations. He joined his wife, Deborah, in giving up tobacco and also betelnut.3 The WHO bestowed Palau with a special recognition award in relation to these increase in taxes.3
Recent data from the Cook Islands illustrates the value of reinvesting revenue raised from tobacco taxes into public health programs as a way of boosting the impact of taxation measures. In the Cook Islands, initial increases in revenue from a 33 per cent increase in tobacco duties has been redirected back to public health to assist in promoting healthy lifestyles, establishing smoking cessation clinics and supplying medication to help smokers quit.4 This coincided with a decline in tobacco/cigarette sales by 20-25 per cent.4
Food and beverage taxes
As noted in the NCD Roadmap Report, increasing the price of unhealthy foods and beverages is one way to discourage consumers from favouring poor nutritional choices, and taxes on food and beverages are likely to be a critical part of a comprehensive NCD prevention strategy.
A common critique of food-related taxes is that they may adversely affect those with lower incomes, particularly if the taxes do not make nutritious foods cheaper than the taxed foods. However, as noted in the NCD Roadmap Report, it is worth highlighting that taxes on food and beverages are not necessarily regressive amongst the young and poor over the medium term, because low-income households and the young reduce their consumption of the now higher priced goods more than wealthier households and adults.5 In addition, the health benefits from changes to consumption tend to be greater in low-income groups.6 Furthermore, there may be room for governments to cross-subsidise healthy foods (e.g., fruits and vegetables) from revenue earned from taxes on unhealthy foods.7 However, such moves would need careful implementation to avoid charges under the World Trade Organisation agreements that domestic goods are being favoured.7
3 The NCD Roadmap Report does not give detailed attention to methods for deciding which foods could be subjected to taxes for NCD prevention. While there are multiple ‘nutrient profiling systems’ available globally to determine the relative healthiness of products, there is no globally-accepted ‘gold standard’ system.8 Nevertheless, some governments have regulated nutrient profiling systems in place. A notable example is the Australian system for determining eligibility of products to make health claims, which has also been used as the basis for the newly approved Health Star Rating food labelling system in Australia.9 This system (or a modified version of it) could be used as a basis for nutrient profiling systems in Pacific Island countries. Most importantly, where a country has implemented a nutrient profiling system for one purpose (e.g. to determine products that are subject to advertising restrictions), it would be valuable to assess if the same system could also be used for other purposes, such as determining whether a food tax applies. Moreover, a regional nutrient profiling system to be used for multiple purposes across the region should be explored.8 Some countries around the world have implemented food taxes on particular food categories (e.g. soft drinks or confectionary). This eliminates the need for detailed compositional analysis of individual products which may be unfeasible, particularly where nutrition labelling is poorly implemented.7 Sugar sweetened beverages (SSBs) are perhaps the most readily-targeted food category for taxation, in that the products to be included are easy to define and the evidence base supporting intervention is strongest.10 Indeed, high SSB consumption, especially among children, is undoubtedly a major contributor to the high energy intake that is a key driver of the obesity problem.11
In a forthcoming paper, Snowdon reports that detailed data on intake levels of SSB in the Pacific is limited, with few nutrition surveys having been undertaken and NCD surveys in the region omitting to collect SSB consumption data.11 Data on imports is available from some countries, and in those that do not manufacture locally this is a reasonable proxy for intake. This data has shown high SSB intake levels across the region.12 Snowdon reports trend data from Fiji that indicates that consumption doubled in the ten years to 2007.11 Furthermore, Snowdon cites one survey of Fijian adolescents, in which they found that around 90 per cent reported consuming SSBs at least four days out of the last five school days, and 70 per cent consumed greater than two glasses on the last school day.11
As detailed in the NCD Roadmap Report, there are good peer reviewed studies that conclude that taxing SSBs reduces consumption, obesity, and raises additional tax revenue. Thus far, the approach used to alter pricing of SSBs has focused on increased excise (applicable to local and imported products) or import taxes, and the number of countries in the region who have chosen to use these continues to grow.11 However, efforts to reduce consumption have not been the sole motive for these taxes, with increased revenue to government also a driver.
Some examples from the region include the following:
• French Polynesia introduced local and import taxes on all SSBs, confectionary and ice-cream in 2002. The levels of tax are relatively low and not intended to change behaviour. Instead, the tax was originally earmarked for a health prevention fund, although the majority of the tax revenue has ultimately been directed to the general budget.13
4 • Nauru introduced a large (30 per cent) tax on all high sugary foods and drinks in
2007, in part to reduce consumption due to concerns about NCDs, but also to raise revenue. While this level of tax should be sufficient to influence behaviour, its impact has not been evaluated.11
• Fiji has introduced and then removed different taxes on SSBs and their ingredients since 2006; however, recent efforts to implement higher levels of taxes on SSBs and to lower the taxes on bottled water by the Ministry of Health have not been successful.11 This was unsuccessful reportedly due to food industry pressure, which has also caused problems with this type of tax elsewhere in the region.11 However, Fiji was more successful in targeting some other unhealthy products in its 2012 and 2013 budgets, with the implementation of increased import tariffs on palm oil and monosodium glutamate.11 Tariffs on imported fruit and vegetables were also successfully reduced at the same time. The impacts of these changes have not yet been assessed, but evaluation is planned.
• Both the Cook Islands and Tonga introduced new duties on SSBs for health reasons in 2013, with Tonga using an excise duty of one Pa’anga per litre and the Cook Islands announcing their import duty would increase annually “to maintain the real value of the levy”.11
While efforts to reduce intake levels are laudable, greater attention is needed to evaluate the impact of these measures.11 Importantly, locally relevant data will be critical in supporting countries in the region to implement effective interventions.
Alcohol taxes
The NCD Roadmap Report summarises the available evidence of the health and social risk of high-levels of alcohol consumption, outlines the case for increases to alcohol taxation, and provides examples of alcohol taxes in the Pacific.
Implementation considerations
As noted in the NCD Roadmap Report, studies show that some Pacific Island countries have a poor record in implementing and keeping current many of their own laws, particularly around food labelling and food standards. An advantage of tax-based interventions is that, once implemented, they are relatively easily sustained.7 This is because they are self-funding and, despite initial resistance, often become accepted by the public relatively quickly.
The main opposition to taxes is likely to come from manufacturers or producers whose interests are affected by reduced demand for their goods. Indeed, Margaret Chan, the Director-General of the WHO, recently contended that the biggest challenge facing health promotion is that efforts to prevent NCDs go against the business interests of powerful economic operators, including the tobacco, alcohol and food industries.14
As the NCD Roadmap Report identifies, the tactics used by tobacco companies to influence policy making are very well-documented, and governments should take care to avoid tobacco industry ‘interference’ in policy making. In addition, governments need to be aware of the potential risks to public health from the influence of the alcohol and food industries on the policy making process.15
5 A recent report from Hawai’i documents the substantial lobbying of the food industry against a proposed SSB tax.16 In addition to direct lobbying against the proposed legislation in Hawai’i, the food industry also used other practices to influence the policy process, including the setting up of fake grassroots organisations that opposed the tax (‘astroturfing’), and strong media efforts to frame the obesity debate in such a way as to deflect attention away from SSBs.16
Strategies to increase the resistance of policy makers to interference by tobacco companies has recently been documented in the Pacific.17 Recommendations include raising awareness and educating the public sector on tobacco industry interference, implementation of explicit guidelines about government engagement with the tobacco industry, and rallying civil society groups and the media to monitor and expose areas of interference. For example, in Papua New Guinea, several standing agreements, including one relating to tobacco tax restrictions between the Department of Finance and a tobacco company, were exposed.17 This led to greater understanding of tobacco industry interference. These strategies could equally be applied to protect against interference by the alcohol and food industry.
In light of industry opposition to regulation, the implementation of tax interventions in most countries requires substantial political commitment. Leadership from an agency, ideally the Department of Health, is essential to drive the implementation and enforcement of legislation.17 In addition, concerted advocacy is needed from civil society, including the media, to engage the public on these issues and maintain pressure on governments to act.18
6 References
1.Anderson I. The economic costs of non‐communicable diseases in the Pacific islands. 2013 [cited June 2014]. Available from:
http://www.worldbank.org/content/dam/Worldbank/document/the-economic-costs-of-noncommunicable-diseases-in-the-pacific-islands.pdf.
2.Beaglehole R, Bonita R, Horton R, et al. Priority actions for the non-communicable disease crisis. Lancet 2011;377(9775):1438-47.
3.Carreon B. World Health Organization Gives Palau Special Award For Tobacco Tax. 2014 [cited June 2014]. Available from: http://pidp.org/pireport/2014/June/06-19-08.htm.
4.Chapman-Smith B. Tobacco Tax Increases In Cook Islands Help Reduce Smoking. 2014 [cited June 2014]. Available from: http://pidp.eastwestcenter.org/pireport/2014/June/06-13-11.htm.
5.Thow AM, Jan S, Leeder S, et al. The effect of fiscal policy on diet, obesity and chronic disease: a systematic review. Bull World Health Organ 2010;88(8):609-14.
6.Nnoaham KE, Sacks G, Rayner M, et al. Modelling income group differences in the health and economic impacts of targeted food taxes and subsidies. Int J Epidemiol
2009;38(5):1324-33.
7.Clarke D. Paradise Lost - The challenges of addressing obesity and diet-related chronic disease in the Pacific. 2006.
8.Sacks G, Rayner M, Stockley L, et al. Applications of nutrient profiling: potential role in diet-related chronic disease prevention and the feasibility of a core nutrient-profiling system. Eur J Clin Nutr 2011;65(3):298-306.
9.Food Standards Australia New Zealand (FSANZ). Nutrition, Health and Related Claims. 2008 [cited March 2008]. Available from:
http://www.foodstandards.gov.au/foodmatters/healthnutritionandrelatedclaims/index.cfm. 10.Brownell KD, Frieden TR. Ounces of prevention--the public policy case for taxes on sugared beverages. N Engl J Med 2009;360(18):1805-8.
11.Snowdon W. Sugar-sweetened beverages in Pacific Island countries and territories: problems and solutions? Pacific Health Dialogue 2014;In press.
12.Snowdon W. Tarrifs, taxes and price control. In: World Health Organization meeting on improving food supply to reduce NCD risk factors in the Pacific; 4th November 2008; Sydney, 2008.
13.Snowdon W, Thow AM. Trade Policy and Obesity Prevention: Challenges and Innovation in the Pacific Islands. Obes Rev 2013;Nov 13; Suppl 2:150-8.
7 14.Chan M. Opening address at the 8th Global Conference on Health Promotion Helsinki, Finland - Dr Margaret Chan Director-General of the World Health Organization. In: World Health Organization, 2013.
15.Moodie R, et al. Profits and pandemics: prevention of harmful effects of tobacco, alcohol, and ultra-processed food and drink industries. Lancet 2013;381(9867).
16.Choy L, et al. Taxing Sugar Sweetened Beverages to Improve Public Health: Policy Action in Hawai‘i. Hawai'i Journal of Medicine & Public Health 2013;72(8):286-91. 17.McCool J, et al. Supporting Pacific Island countries to strengthen their resistance to tobacco industry interference in tobacco control: a case study of Papua New Guinea and Solomon Islands. Int J Environ Res Public Health 2013;10.
18.Brinsden H, Lobstein T, Landon J, et al. Monitoring policy and actions on food environments: rationale and outline of the INFORMAS policy engagement and communication strategies Obes.Rev. In press.
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