A Healthier Kazakhstan: Cutting Sugary Drinks with Smart Taxes

The consumption of sugary drinks in Kazakhstan is soaring. Between 2018 and 2023, per capita sales of sugar sweetened beverages rose by 50%, largely due to rising intake by young people, with half of school-aged children consuming these products on a weekly basis. Higher sugar consumption is linked to health problems such as type 2 diabetes, obesity, tooth decay, stroke risk, and various types of cancer.

This alarming trend has led to a critical issue: Nearly a quarter of children in Kazakhstan are overweight or obese, marking an urgent public health challenge.

Recognizing these serious health concerns, 121 countries worldwide have implemented sugary sweet beverage taxes, including national-level taxes in 106 countries. These taxes encourage consumers to make healthier choices, while at the same time raising revenues to spend on development priorities.

Although governments may initially be concerned about how such a tax affects business, evidence from other countries shows these concerns are often overstated. The manufacturers of sugar-sweetened beverages also produce alternatives such as water and diet drinks. As consumers consider other ways of quenching their thirst, spending is typically reallocated to different products.

Smart Taxes, Healthier Choices

Like many other countries, Kazakhstan could similarly take bold action and apply a well-designed tax to sugar-sweetened beverages. Today, such sugary drinks are 13% cheaper than water. A new tax could reverse this trend. The Ministry of Health developed a proposal in 2023 to apply a tax of KZT 100 per litre (US$ 0.21) and to increase the tax for two years, reaching KZT 180 per litre (US$ 0.38), which would on average account for 22% of the price of sugar sweetened beverages.

The World Bank evaluated this proposal considering two elements of a well-designed tax:

• First, taxes need to target the sugar content of a drink, rather than the value of the product. In other countries, the new tax has helped to lower the amount of sugar in a beverage
• Second, it is recommended that the tax rate should be at least 20% of the retail price to be meaningful. On both counts, Kazakhstan’s proposal is in line with good practices.

And now onto impact. The World Bank’s modelling suggests that the tax would reduce the sales of sugary drinks by 16% while purchases of bottled water are expected to increase by 41%. Overall, only a 3% decline in the sales of all non-alcoholic beverages is expected, limiting any potential adverse effects on the economy.

The tax is projected to increase government revenues by around 0.25% of GDP by the third year, similar to the amount collected from tobacco taxes (in 2021), and more than alcohol taxes currently contribute.

This proposal for a tax on sugary drinks would not be the first time that Kazakhstan uses taxation as a smart policy to improve health outcomes. Between 2012 and 2022, cigarette excise taxes increased by 352% which coincided with lives being saved as deaths per 100,000 people declined by 25% over the same period. Nevertheless, cigarette prices are relatively low—the 5^th lowest in Europe and Central Asia.

Kazakhstan has an important entry point for reform. The forthcoming revision of the Tax Code provides an opportunity to put the tax for sugar-sweetened beverages into action and reassess tobacco and alcohol taxes to promote better health outcomes and raise much needed revenues for public spending.

The World Bank’s Global Tax Program and the Health Taxes Project are committed to helping countries like Kazakhstan design effective taxes that promote better health outcomes while supporting fiscal sustainability.

For further questions please contact Ceren Ozer, Evan Blecher, Natasha Sharma.