Fiscal and Pricing Policies Related to Food and Non-alcoholic Drinks
- Project start date: 1 January 2021
- Project status: Completed
- Project type: Nutrition
- Discipline: Obesity
- Author/s: Prof Ciaran O’ Neill, QUB
- Collaborator/s: National University of Ireland, Galway
Research objective
- To review the evidence on fiscal and pricing strategies for food and non-alcoholic drinks. The review of the evidence comprised two umbrella reviews of the literature and two empirical studies.
Outputs
Research report
- Title: Fiscal and pricing policies related to food and non-alcoholic drinks
- Publication date: 15 May 2023
- Summary: safefood commissioned this review of the evidence on fiscal and pricing strategies for food and non-alcoholic drinks to identify gaps in knowledge and set out policy recommendations relevant to the island of Ireland.
- Findings:
- There is sufficient evidence (mainly from SSBs) to suggest that taxes affect consumption if applied appropriately.
- While there is evidence of public support for measures to address obesity/overweight, there is limited evidence of support for using taxes to achieve this. Consensus must therefore be sought as to the merits of such policies, providing credible evidence that they succeed and will mitigate any regressive effects that disadvantage lower-income groups.
- There is currently a lack of evidence on the impact of taxes and pricing policies on health outcomes. This is an important gap in itself, and also matters because of its potential to undermine arguments for the use of taxes and pricing policies in the future. While our preliminary evidence suggests they affect the use of healthcare services, further evidence of health effects is required.
- We recommend that the use of fiscal instruments be considered beyond those currently applied to SSBs, with a view to improving public health and reducing health inequalities.
- Recommendations:
- If the intention is to minimise the administrative burden, then a value-added tax may be most appropriate as this fits within the existing tax structure and automatically adjusts for inflation. However, it may drive consumers towards more unhealthy but cheaper goods.
- If the intention is to raise government revenue, then a lower (15-25% increase in the price faced by consumers) ad-quantum tax on health-harming nutrients may be most appropriate as it would reduce leakage to cheaper alternative SSBs. Also, if announced far enough in advance of its introduction, this tax may encourage manufacturers to reformulate their products.
To improve the acceptability of an FI, the government should:
- Be clear about the intention and of the FI and how its design is fit for purpose
- Provide credible evidence on how effectively FIs can achieve their goals
- Set out measures to mitigate costs or create positive financial advantages for lower-income consumers (distributional effects)
- Set measurable goals to assess how effectively the FI achieves its intention, and audit its progress
- Promise to share information on progress towards the stated goals and mitigations
In the cases of diet-related taxes specifically, government should:
- Where feasible, target health-harming nutrients as opposed to individual products
- Where this is not feasible, identify a list all health-harming products which may act as substitutes and may require taxation
- Coordinate with neighbouring jurisdictions to avoid possible cross-border leakage
- Undertake educational and promotional campaigns to highlight the potential of such instruments to improve health
- Use revenues raised through such measures to mitigate costs to lower-income groups – for example, by subsidising fruit and vegetables – and promote these alternatives to the public
- Audit and publicise the allocation of revenues to these initiatives.
- In addition to promoting the positive intentions and impacts of taxes, government should counter opposition narratives about how taxes can damage the economy, including by fact-checking and countering industry sponsored studies.
- Furthermore, where opposition groups publicise anti-tax narratives, government should, as part of their promotion strategy, highlight the sources of this messaging and show how it stems from the biases of these groups.
You can download the report below.
