Globally, 2.6 million people have been dying from drinking alcohol every year, while that number is over 8 million from an unhealthy diet. Implementing a tax on alcohol and SSBs could reduce these deaths.
There is undeniable evidence that products such as tobacco, alcohol, and Sugar Sweetened Beverages (SSBs) constitute primary risk factors for numerous Non-Communicable Diseases (NCDs). (Creative Commons)
“The situation is alarming. Our study reveals the enormous burden of non-communicable diseases across the country. There is an urgent need for all state governments to sit up and initiate intervention strategies.”
This is what noted diabetologist and Dr Mohan’s Diabetes Specialities Centre (DMDSC) Chairman Dr V Mohan, said while announcing the results of a unique, comprehensive, and historical study funded by the Indian Council of Medical Research and the Ministry of Health and Family Welfare (ICMR-INDIAB) in June this year.
This study focused on the idea that India was developing at a fast rate, enabling people to afford products like alcohol and sugar-sweetened beverages (SSBs), whose consumption could lead to non-communicable diseases, or NCDs.
Projection of non-communicable disease burden in the country. (Supplied)
The study projected that more than 300 million people suffered from hypertension, and 100+ million had diabetes in India.
It may be noted that SSBs are non-alcoholic beverages that contain added caloric sweeteners, such as sucrose (sugar) or high-fructose corn syrup.
The main categories of SSBs are carbonated soft drinks, energy drinks, sports drinks, less-than-100-percent fruit or vegetable juices, ready-to-drink teas and coffees, sweetened waters, and milk-based drinks.
Now, the World Health Organisation (WHO) has called on countries to raise taxes on alcohol and SSBs, as globally 2.6 million people die from alcohol every year, while that number is over eight million for an unhealthy diet.
Implementing a tax on alcohol and SSBs would reduce these deaths, the WHO has said.
WHO said that a 2017 study showed that taxes that increased alcohol prices by 50 percent would help avert more than 21 million deaths over 50 years and generate nearly $17 trillion in additional revenue. This was equivalent to the total annual government revenue of eight of the world’s largest economies.
“Taxing unhealthy products creates healthier populations. It has a positive ripple effect across society — less disease and debilitation and more revenue for governments to provide public services. In the case of alcohol, taxes also help prevent violence and road traffic injuries,” said Dr Rűdiger Krech, director of health promotion, at the WHO, in a statement.
The organisation said research showed that taxing alcohol and SSBs also helped cut down the use of these products and gave companies a reason to make healthier products.
At the same time, a tax on these products helped prevent injuries and NCDs such as cancers, diabetes, and heart diseases.
In India, alcohol is subject to excise tax, while SSBs are subject to varying taxes based on the Goods and Services Tax (GST) regime.
Soya-milk drinks, fruit pulp or fruit juice-based beverages, beverages containing milk, and tender coconut water packaged in unit containers with a registered brand name are taxed 12 percent under GST.
Other non-alcoholic beverages, including aerated waters and all products containing added sugar, sweetening agents, or flavouring, attract a 28 percent GST.
Additionally, the government imposes a compensation cess of 12 percent on aerated waters, lemonade, caffeinated beverages, and carbonated beverages with fruit drinks or fruit juices.
Notably, these tax regulations were implemented in July 2017 when the GST system was introduced in the country.
The WHO advocates for the taxation of sweetened beverages such as Coke or Pepsi in India. This recommendation aligns with global health initiatives to address the adverse health effects associated with the consumption of sugary drinks.
According to the WHO, SSBs contribute significantly to sugar and energy intakes around the world without adding any nutritional value to diets.
It said there was strong evidence linking excess sugar and SSB consumption to a range of adverse health effects including tooth decay, excess weight gain, and increased risk of developing obesity and type-2 diabetes.
“The burden of disease attributable to SSBs is considerable given that they are a singular and entirely discretionary (nonessential) component of the diet. Indeed, the WHO recommends that governments impose taxes on SSBs that raise retail prices by at least 20 percent to reduce consumption and improve population health,” said the health body.
According to the World Bank, taxation of SSBs was internationally recommended from a public health perspective as a priority component of a comprehensive approach to preventing and controlling obesity and diet-related NCDs.
“Excess SSB consumption generates both internalities (costs that individual consumers impose on themselves, mainly in the future) and externalities (costs that consumers impose on others, primarily in the form of public healthcare costs and lost productivity),” said the World Bank.
“These real costs are not reflected in the prices charged for SSBs. Taxation is an effective policy lever available to governments to discourage sub-optimally high consumption of SSBs and improve societal welfare,” it added.
Now, the question is whether the tax would help in the reduction of consumption of alcohol and SSBs in India.
According to a study by Kochi-based health economist Rijo M John, “The own-price elasticity of SSBs is −0.94 in the overall sample and varies between −1.04 and −0.83 from low- to high-income households.”
The price elasticity formula. (Creative Commons)
Price elasticity is essentially the change in consumption of a product or service depending on the change in its price.
Let’s say there is a 10 percent increase in the price of a chocolate bar. In response, the demand for that chocolate bar decreases by 5 percent.
Thus, the price elasticity of demand would then be the change in demand divided by the change in price. Which is 5/10= ½, that is 0.5. Meaning the demand is half in response to the change in price.
The study found that if there was an increase in tax by 10 percent in the case of aerated or sugar-sweetened beverages (ASBs), the demand would decrease by 9.5 percent (based on a predetermined formula).
“Therefore, the reduction in consumption aligns closely with a price increase. To achieve a 10-percent price increase, a tax rate exceeding 10 percent may be necessary. In essence, a 10-percent price increase through taxation translates to a considerable reduction in consumption. This price responsiveness is a consistent trend observed in numerous cities across various countries,” Dr Rijo M John told South First.
“Notably, tobacco products exhibit lower price elasticity, with a value of around 0.4 in India. For instance, a 10 percent increase in cigarette prices results in only a 4 percent reduction in consumption,” he explained.
He added that in contrast, SSBs display higher price elasticity. In India, a 10-percent increase in the price of SSBs led to a more substantial reduction — approximately 9.5 percent, or close to 10 percent.
“This signifies that SSBs are more responsive to price changes compared to products like tobacco,” he added.
“There is compelling evidence that the affordability of these products has notably increased. Firstly, the rise in people’s incomes naturally contributes to enhanced affordability. Thus, even if the prices of products haven’t seen a significant decrease, they become more accessible as the average income rises,” said Rijo.
He added that a noteworthy concern arose when the prices of these products failed to keep pace with overall inflation or the prices of other commodities.
“We want to see this in products like SSBs, tobacco products, or alcoholic products, which are considered to be highly harmful and a cause of a variety of NCDs. These products should become increasingly less affordable,” he said.
Regrettably, this desirable trend was not evident in India. Moreover, companies were adopting strategies such as reducing the price of products like soft drinks from ₹40 to ₹20, making them more accessible to the public.
While this might seem beneficial on the surface, it posed a challenge when it came to public health, especially if these products are known for their adverse effects.
“The absence of tax increases is a pivotal factor contributing to the sustained affordability of these products. Unlike the pre-GST era, where excise taxes and state-level VAT rates were periodically revised, the current tax rates on these products have remained unchanged for the six years since the introduction of GST,” noted Rijo.
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