Health Taxes

This discussion paper focuses on the World bank’s South Asia and East Asia and the Pacific regions. Despite a rebound in economic growth following the pandemic, new geopolitical developments and macroeconomic shocks, as well as the lingering uncertainty of the Covid-19 pandemic pose further challenges to sustainable public financing for health. These recent challenges are superimposed on longer-term issues—aging, noncommunicable diseases, climate change, and future pandemic preparedness—which are shared across the Asia-Pacific, a dynamic region ranging from small Pacific Island states to the two most populous countries in the world. Leveraging health taxes is identified as a specific health reform opportunity, with country spotlights highlighting relevant successes and remaining challenges in this area, with a regional analysis on SSB taxes.

This Approach Paper considers the role of public finance to build, protect and utilize human capital as countries seek to recover from the COVID-19 crisis and lay a foundation for inclusive, resilient and sustainable development.

This report lays out why overweight and obesity is a “ticking time bomb” with huge potential negative economic and health impacts, especially for the poor and people who live in low- or middle-income countries, dispelling the myth that it is a problem only in high-income countries and urban areas. The report also presents opportunities to address obesity, including fiscal policies such as taxation and subsidies.

This report considers the role of public finance to build, protect and utilize human capital as countries seek to recover from the COVID-19 crisis and lay a foundation for inclusive, resilient and sustainable development. The paper defines the problem in relation to human capital outcomes amid the COVID-19 crisis and outlines three areas for action: policy priorities, governance, and fiscal space for building and utilizing human capital.

This series uses macroeconomic projections released by the International Monetary Fund to project the possible time path of health spending in 178 countries and territories. The analysis shows that despite a projected return to global economic growth from 2021, low- and lower-middle-income countries would, with few exceptions, struggle to maintain health spending at levels sufficient to continue combating the pandemic. The paper discussed a range of policy options that countries could use to increase the available domestic resources for health in times of economic crisis, including health taxes.

This book reviews the trends in tax revenue collection in developing countries. It provides an overview of efforts to close the revenue gap, many of which have been supported by World Bank operations. An overview of tax policy and administration reform programs is presented, with an overview of outstanding issues that will shape the policy agenda in years ahead.

This note provides guidance on how to carry out a “drill-down” examination of domestic resource mobilization for increased health sector fiscal space to ensure progress towards universal health coverage. It specifically aims to identify a given country’s most critical opportunities (and constraints) to increase domestically-resourced public financing for universal health coverage, including health taxes.

The Platform for Collaboration on Tax — a partnership of the International Monetary Fund, the Organization for Economic Cooperation and Development, the United Nations, and the World Bank Group — brought together nearly 500 representatives from governments, academia, civil society, international organizations, private sector and regional groups to participate in its first Global Conference in New York (2018). This report presents key messages coming from the conference sessions.

This handbook is a product of the Global Tax Team in the Equitable Growth, Finance, and Institutions Vice Presidency. It adds to the tools at policy makers’ and administrators’ disposal to address this multifaceted challenge by providing useful insight into understanding the challenges in different country situations aa well as lessons learned.

This report provides decision support for policy makers on tobacco tax reform, as well as analytical and empirical tools for using tobacco excise taxes to save lives and increase government revenues. The report sets forth the public health, economic, and anti-poverty case for higher tobacco taxes; shows how some countries have already delivered ambitious reforms; and documents measurable results.

This note summarizes a set of studies of the effects of raising tobacco taxes in 11 low and middle-income countries using an extended cost-benefit analysis and harmonized national household budget survey data. It also introduces the TOBACTAX Tool (see Tool Highlight below). The studies find that demand price elasticities for tobacco products are larger among lower-income households and that the poor receive the largest long-term gains from tobacco taxation.

In 2012, the Philippines successfully passed a landmark tobacco and alcohol tax reform—dubbed the “Sin Tax Law.” This book describes the design of the Philippines sin tax reform, documents the technical and political processes by which it came about, and assesses the impact that the reform had after three years of implementation.

This booklet summarizes work done, outputs, and policy impact in different countries across different regions supported under the World Bank Group Global Tobacco Control Program, over the 2015-2018 period.

Designing and implementing good “sin” taxes is a surprisingly complex task. Earmarking revenues from such taxes for health expenditures may also sound good and be a useful selling point for new taxes. However, such earmarking raises difficult issues with respect to budgetary rigidity and political accountability. This note explores these and other issues that lurk beneath the surface of the attractive concept of using increased sin excises on alcohol and tobacco to finance “virtuous” social spending on public health.

This document describes the course of events that led to the phased adjustment of the tobacco tax approved by Congress in December 2016, with a view to aligning the price of cigarettes in Colombia with the Latin American average.

This study compares the simulated distributional effects of tobacco tax increases in eight low- and middle-income countries. It applies a standardized extended cost-benefit analysis methodology and relies on comparable data sources across countries. The net effect of raising taxes on cigarettes encompasses the direct negative price shock to household budgets and the long-term benefits of improved health outcomes.

Despite the obvious positive health impacts of tobacco taxation, an argument raised against it is that poor households bear the burden of the increased prices because of their higher share of spending on tobacco. This note includes estimates of the distributional impacts of price rises on cigarettes under various scenarios using the Household Income and Expenditure Survey 2016/17. 

This paper uses an extended cost-benefit analysis to estimate the distributional effect of tobacco tax increases in Bosnia and Herzegovina. The analysis considers the effect on household income of an increase in tobacco prices, changes in medical expenses, and the prolongation of working years under various scenarios, based on data in three waves of the national Household Budget Survey. 

This paper describes and simulates the effects of the tobacco tax on incomes in Chile assuming three different price-elasticity scenarios for different income deciles of the population. The results show that although increasing the price of tobacco through higher taxes generates negative income variations across all groups in a population, under a more comprehensive scenario that includes benefits through lower medical expenses and an increase in working years, the results invert, and the overall monetary effect of the taxation policy becomes positive.

This paper addresses the policy concern of the welfare and distributional impact of increasing taxes on cigarettes. It seeks to determine whether the claims of the regressive effects of tobacco tax policies have empirical validity in the case of Georgia.

Tobacco taxes are often considered regressive because the share of household budgets allocated to tobacco products is larger among low-income households than among high-income households. This paper shows that, if behavioral and indirect effects, especially health-related effects, are taken into account, this is no longer valid.

Tobacco tax increases are one of the most effective measures to reduce tobacco consumption, but are usually believed to be regressive, taxing the poor proportionally more than the rich. This paper estimates the tobacco price elasticity of demand for Moldova by income decile and undertakes an extended cost-benefit analysis to estimate the distributional effect of a rise in tobacco taxes on income distribution.

This study compares the distributional impacts of the main tax and social spending programs in eight countries of the former Soviet Union (Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, the Russian Federation, Tajikistan, and Ukraine) by applying a state-of-the-art fiscal incidence analysis based on the Commitment to Equity methodology.

Tobacco taxes are often considered regressive because the share of household budgets allocated to tobacco products is larger among low-income households than among high-income households. This paper shows that, if behavioral and indirect effects, especially health-related effects, are taken into account, this is no longer valid. The long-run benefits of not smoking offset the costs associated with tobacco taxes among low-income groups and the overall population.

Tobacco taxes are often considered regressive because the share of household budgets allocated to tobacco products is larger among low-income households than among high-income households. This paper argues that if indirect effects, especially on health, are taken into account, this is no longer valid. The long-run benefits of not smoking offset the costs associated with tobacco taxes among low-income groups and the overall population.

This paper projects the effects of an increase in the tobacco tax on household welfare in Ukraine. It considers three price-elasticity scenarios among income deciles of the population. The results show that although tobacco taxes are often criticized for being regressive in the short run, in a more comprehensive scenario that includes medical expenses and working years, the benefits of tobacco taxes far exceed the increase in tax liability, benefitting in large measure lower income households.

This paper aims to test empirically the claims on the distributional effects of increasing taxes on tobacco in Vietnam. It analyses microdata from the Household Living Standards Survey (VHLSS) and the Global Adult Tobacco Survey (GATS) and other available sources to carry out an Extended Cost Benefit Analysis (ECBA) on the potential effects of raising taxes on tobacco products under different simulated scenarios.

Alan Fuchs Tarlovsky (World Bank, Poverty and Equity Global Practice)

María Fernanda González Icaza (World Bank, Poverty and Equity Global Practice)

European Journal of Public Health, Volume 31, Issue 5, October 2021, Pages 936–942, doi:10.1093/eurpub/ckab029.

Global Tobacco Economics Consortium

British Medical Journal 2018; 361, doi: 10.1136/bmj.k1162.

The most effective approach to reduce alcohol-related problems is to implement a comprehensive set of measures to reduce alcohol consumption and related problems. Policy options include price increases (including higher taxes, restrictions on availability (i.e. limits on the times and conditions of alcoholic beverage sales or service, minimum-age limits), strong drink-driving legislation and ready access to treatment.

In 2012, the Philippines successfully passed a landmark tobacco and alcohol tax reform—dubbed the “Sin Tax Law.” This book describes the design of the Philippines sin tax reform, documents the technical and political processes by which it came about, and assesses the impact that the reform has had after three years of implementation.

Designing and implementing good “sin” taxes is a surprisingly complex task. Earmarking revenues from such taxes for health expenditures raises difficult issues with respect to budgetary rigidity and political accountability. This note explores these and other issues that lurk beneath the surface of the attractive concept of using increased sin excises on alcohol and tobacco to finance “virtuous” social spending on public health.

This evidence review is designed to support policy makers seeking to implement a tax on sugar-sweetened beverages (SSB). It synthesizes the latest global evidence of effectiveness of SSB taxes and summarizes international experiences with SSB taxation to-date. A summary is also available as a short knowledge brief.

Arguments against SSB taxes tend to closely mirror those used against other health taxes, including that these taxes are not effective, are regressive (hit the poorest hardest), lead to job losses and hurt business, and violate international, regional, or national law. This brief outlines common arguments against SSB taxes, along with the evidence that can be used to counter each proposition.

Industry-sponsored studies reporting negative effects of SSB taxes on businesses, employment, and economic growth have been used very effectively to support arguments against SSB taxes and influence health-related policy. This brief summarizes the impact of SSB taxes on business, employment, productivity, and government revenue generation.

This report represents the first use of the extended cost-benefit analysis to examine the income distribution effects of taxes on SSBs. The main outcome of interest is the net effect of the taxes on household income via three channels: (1) larger amount of household budget expenditure on SSBs, (2) savings in out-of-pocket spending on health care because of lower disease incidence associated with reduced SSB consumption, and (3) higher labor income resulting from an increase in life-expectancy. A summary is also available as a Poverty and Equity Note.

This paper applies an extended cost-benefit analysis to assess the welfare and distributional effects of a simulated increase in excise taxes on SSBs in Ukraine. It accounts for the long-term benefits of reducing out-of-pocket (OOP) medical expenses and human capital losses due to mortality and morbidity related to the excessive consumption of SSBs in Ukraine.

The purpose of this study is to learn from Mexico’s experience in implementing this novel fiscal policy in the fight against obesity. The objectives of this work were to: (i) understand the context in which the fiscal policy was enacted; (ii) describe in detail main features of these taxes; (iii) evaluate the design and implementation process of the policy; (iv) take stock of what is known about the impact of these taxes on fiscal revenue, prices, and consumption among different population groups; and (v) provide options to monitor this reform on a regular basis using publicly available data.

Impact of a sugar-sweetened beverage tax on sugar producers in Ukraine

Kate Mandeville, Bethany Warren, Olena Doroshenko  (World Bank, Health, Nutrition, and Population Global Practice),

Oleg Nivievskyi, Roman Neyter, Pavlo Martyshev, Volodymyr Vakhitov (Kyiv School of Economics)

Global Coverage and Design of Sugar-Sweetened Beverage Taxes

Libby Hattersley and Kate Mandeville (World Bank, Health, Nutrition, and Population Global Practice)