The impacts on food purchases and tax revenues of a tax based on Chile’s nutrient profiling model

Abstract

Background In June 2016, Chile implemented the Law of Food Labelling and Advertising, which included a mandatory front-of-pack warning labels on food and beverages high in added sugar, saturated fat, sodium or energy density, restrictions on child-directed marketing and on the promotion and sales of these products in schools. The regulation does not include taxes although Chile had implemented a tiered tax on SSBs two years before this law was implemented. Therefore, the objective of the study was to simulate the impact of taxing food and beverages based on the cutoff’s points for warning labels on purchases and revenues. Methods We derived price elasticities using the linear approximation of the almost ideal demand system for six groups of labeled food and beverages (with a warning label based on the regulation) and unlabeled (with no warning label): 1) unlabeled beverages, 2) labeled beverages, 3) unlabeled cereal based products, 4) labeled cereal based products, 5) labeled meat and fish and 6) labeled sweet snacks and desserts. The study used data on household food beverage purchases from the Kantar WorldPanel Chile and Euromonitor sales to adjust the Kantar elasticity results to the national average. We estimated revenues under three tax scenarios for all labeled food and beverages: 10%, 20%, 30% of the final price excluding taxes. Results Except for labeled fish and meat, all food and beverage groups were price elastic. After accounting for a reduction in consumption after the taxes, economic and population growth, revenues for all groups could reach between 457 million USD to 1.3 billion USD. These results based on the much larger tax base of these labeled “high in added sugar, salt or saturated fat or energy density” foods and beverages is much larger. Conclusion This fiscal package could be implemented in countries with warning labels to enhance health and welfare. The Chilean warning label front-of-the-package system provides an important guide for countries considering policies to reduce diet-related non communicable diseases, including obesity. The fiscal policy impact alone, as shown here for Chile, will be highly impactful in reducing ultra-processed food intake and generating revenues.

Political Economy Analysis of Health Taxes (Tobacco, Alcohol Drink, and Sugar Sweteened Beverage): Case Study of Three Provinces in Indonesia

“…In addition to fiscal measures, non-fiscal measures are equally important. While the majority of past studies have shown a negative relationship between health taxes and unhealthy consumption or NCD prevalence (70,(75)(76)(77)(78)(79)(80), anticipating consumers' substitution with cheaper but equally harmful alternatives is important (68,81). Therefore, increasing consumer awareness to consciously limit their consumption of unhealthy products should be a priority.…”

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

“…9 10 Finally, we assessed the potential impact of redesigning taxes as a stand-alone intervention; however, recent evidence from Chile shows that coupling taxes with front-of-package warning labels and regulation of food and beverages offered in schools, could lead to larger gains. 32 We acknowledge that we lack comprehensive uncertainty intervals for our estimates because we could not obtain CIs or SEs for price elasticities and obesity BMJ Global Health costs-not reported in the papers used-and for job losses as the input-output matrix provides point estimates only. Thus, our CIs underestimate the uncertainty associated with all of these data sources and should be interpreted cautiously.…”

Overweight and Obesity in Saudi Arabia: Consequences and Solutions

“…There is ongoing discussion around furthering policy integration efforts by linking the tax designs in Chile with its Food Labeling and Marketing Law. Simulations of expanding the tax to include unhealthy processed foods in Chile show that with such a tax, in line with food labeling and marketing regulations, household purchases of these items would fall dramatically (Caro et al 2017;Colchero, Paraje, and Popkin 2020). In addition, there would be reductions in nutrients of concern in Chile (sugar, sodium, saturated fats, and calories) linked with the most common NCDs (Caro et al 2017).…”