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FISCAL POLICIES FOR DIET, IN PARTICULAR EFFECTIVE SUGAR- SWEETENED BEVERAGE (SSB) TAXATION.

FISCAL POLICIES FOR DIET, IN PARTICULAR EFFECTIVE SUGAR- SWEETENED BEVERAGE (SSB) TAXATION.

BACKGROUND AND INTRODUCTION

Understanding the problem:

Noncommunicable diseases (NCDs) have become a global issue with high numbers of deaths registered worldwide at 41 million. Among NCDs, the top four that together account for most global deaths include cardio vascular diseases (17.9 million), cancers (9 million), respiratory diseases (3.9 million) and diabetes (1.6 million). The World Health Organisation states that noncommunicable diseases kill 41 million people each year, equivalent to 71% of all global deaths. Each year, 15 million people die from NCDs between the age of 30 and 69 year over 85% of these “premature” deaths occur in low-and middle-income countries.

Just like the rest of the world, Uganda is also battling an increase in NCD-related deaths. According to WHO, a total of 97,600 people died in 2016 as a result of NCDs which is estimated to have accounted for 33% of the country’s total annual deaths. Reports show that the risk of premature deaths of Ugandans between 30 to 70 years is at 22%. The consumption of sugar sweetened beverages is a major contributory factor to noncommunicable diseases in many countries worldwide. Sugar-sweetened beverages are any liquids that are sweetened with various forms of added sugars like brown sugar, corn sweetener, corn syrup, dextrose, fructose, glucose, high-fructose corn syrup, honey, lactose, malt syrup, maltose, molasses, raw sugar, and sucrose. Examples of SSBs include, but are not limited to regular soda (not sugar-free), fruit drinks, sports drinks, energy drinks, sweetened waters, and coffee and tea beverages with added sugars. Sugar sweetened beverages contain added sugars for example a 330ml sugar-sweetened carbonated drink contains almost nine teaspoons of sugars.

Excessive sugar consumption is a key factor in promoting overweight and obesity, tooth decay and diabetes (2). There is increasing concern that intake of free sugars – particularly in the form of sugar-sweetened beverages – increases overall energy intake and may reduce the intake of foods containing more nutritionally adequate calories, leading to an unhealthy diet, weight gain and increased risk of non-communicable diseases. More studies show that sugary drinks often have no nutritional value and are particularly harmful to the body. The liver absorbs sugar in liquid form more quickly than in solid form and therefore cannot efficiently process and release it. The excess is stored in the liver as fat or glycogen deposits and thereby causes obesity and its related diseases, increasing the risks of hypertension, liver and kidney damage, heart disease, and some cancers. This clearly shows that unregulated consumption of sugar sweetened beverages affects the right to health of individuals as it is one of the leading causes of non-communicable diseases.

According to World Health Organization (WHO), 80% of premature NCD-deaths can be prevented through adoption of healthy eating lifestyles. In the same light, WHO notes that there is reasonable and increasing evidence that appropriately designed taxes on sugar sweetened beverages would result in proportional reductions in consumption, especially if aimed at raising the retail price by 20% or more. The reductions in consumption of these sugar sweetened beverages through increased taxes will therefore reduce on the high rate of non-communicable diseases and thereby an achievement in the fulfillment of the right to health.

Uganda’s obligations on fiscal policies for diet:

Every Ugandan has a right to health and the state is under an obligation to protect, promote and fulfil this right. Internationally, the right to health was first well-articulated and defined in the WHO Constitution of 1946 that defined the right to health as the state of complete physical and mental wellbeing and not the mere absence of infirmity or disease. The Universal Declaration of Human Rights under Article 25 also articulates this right and emphasizes recognition of the rights of all persons to an adequate standard of living including guarantees for health and wellbeing. The International Covenant on Social, Economic and Cultural Rights spelt out this right more definitely under Article 12 binding state parties to recognize “the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.”

At the East African Region, Article 188 of the Treaty for the establishment of the East African Community obliges partner states to promote harmonized national health policies and regulations to enhance the efficiency of health care. Uganda being signatory to all the above instruments, international law calls upon the state to promote, protect and fulfill the rights. This means the government to promote the right to adequate food including safe food and the promotion of healthy diets to prevent non-communicable diseases like those linked to sugar sweetened beverage.

According to World Health Organization (WHO), 80% of premature NCD-deaths can be prevented through adoption of healthy eating lifestyles. The Global Action Plan for the Prevention and Control of Noncommunicable Diseases 2013–2020 proposes that “as appropriate to national context, countries consider the use of economic tools that are justified by evidence, and may include taxes and subsidies, to improve access to healthy dietary choices and create incentives for behaviours associated with improved health outcomes and discourage the consumption of less healthy options”. In the same light, WHO found that there is reasonable and increasing evidence that appropriately designed taxes on sugar sweetened beverages would result in proportional reductions in consumption, especially if aimed at raising the retail price by 20% or more. There is similar strong evidence that subsidies for fresh fruits and vegetables that reduce prices by 10–30% are effective in increasing fruit and vegetable consumption. There is urgent need for government to put in place and implement actions that can promote public health like taxing the sugar sweetened beverages.

  1. Laws in Uganda on Taxation of Sugar Sweetened Beverages (SSB)

The amendment to this Act which was the Excise Duty (Amendment) Act, 2017 imposes a tax on sugar sweetened beverages at a rate of 13% or Shs 240 per liter for non-alcoholic beverages not including fruit or vegetable juices and 13% or Shs 300 per liter for fruit and vegetable juice except juice made from at least 30% of pulp from fruits and vegetables grown in Uganda.

Gaps in the Act:

  • The category of products to which the current tax applies captures all non-alcoholic beverages including water and drinks without added sugar, so it is not a specific ‘SSB tax’
  • Currently there’s no tax that specifically apply to SSBs, the applicable Common External Tariff rate for this category is 25% which is actually too high for a healthy product like mineral water.
  • The tax is not designed in a manner to be imposed on the basis of sugar content, so would not encourage reformulation to reduce sugars

Also excise tax trends indicate that consumption of SSBs is increasing and the tax is paid into centralized revenue and does not specifically fund any health initiatives.

  • Taxes on sugar sweetened beverages in other jurisdictions
  • Zambia

Between 2009 and 2011, the burden of NCDs in Zambia increased by over 50%. By 2016, close to a quarter of all deaths in the country were attributed to NCDs. The Zambia Sample Vital Registration with Verbal Autopsy 2015/2016 report indicated that more than 14.8% of the NCD related deaths were accounted to cancer whereas endocrine, nutrition and metabolic-related diseases accounted for 1 in 10 of all NCD deaths. Between 2001 and 2014, the number of overweight and obese women in Zambia increased by about 75%[1].  The country levied 25% excise tax on sugar sweetened beverages and this tax raises up to US$5.46 million in revenue annually. The obesity prevalence also reduced by 0.49 percentage points (95% CI 0.41 to 0.57). The reduction was significantly higher in women than in men.

  • South Africa

The problem of obesity has grown over the last 30 years in South Africa. Obesity in South Africa is ranked fifth as a risk factor and the country has the highest overweight and obesity rate in Sub- Saharan Africa and the second highest in Africa. In 2016, combined obesity and overweight prevalence in South Africa (SA) was 68% among women and 31% among men. Obesity-related non-communicable diseases (NCD) contributed to 40% of overall deaths in 2013. The state adopted the Strategic Plan for the Prevention and Control of Obesity 2015-2020 with a target of reducing obesity prevalence by 10 percent by 2020. Taxation of sugar sweetened beverages was one of the major policy options.

In 2018, the South African government introduced a tax on sugar sweetened beverages called the Health Promotion Levy (HPL) on Sugary beverages. This tax on sugar sweetened beverages entails a charge of 2.21 cents per gram of sugar content that exceeds 4 grams per 100 ml which is approximately a 10% tax on the price of a can of soda . The latest treasury figures show that the tax has generated a profit of R3.2 billion (US$ 214 million) in less than a year.

  • Mexico

In January 2014, the government of Mexico added a 1 peso per litre excise tax on any non-alcoholic beverage with added sugar (powder, concentrates or ready-to- drink) to the country’s Special Tax on Production and Services, which is paid by the producer and represents about a 10% increase in price for the consumer. A study conducted by the Mexican National Institute of Public Health and the University of North Carolina evaluating the first two years of implementation showed an average reduction of 7.6% in the purchase of taxed sugary drinks during 2014 and 2015. Households with the fewest resources had an average reduction in purchases of 11.7%. The study showed a 2.1% increase in purchases of untaxed beverages, particularly purchased bottled water. Over US$ 2.6 billion was raised during the first two years of implementation; some of this revenue is beginning to be invested towards installing water fountains in schools across Mexico.

  1. Recommendations
  1. Parliament
  2.  According to the Excise Duty Act, the tax is imposed on the product per litre. However, there is need for a health promotion approach by reducing the consumption of beverages with high sugar content. We therefore recommend that Parliament amends this Act to the effect that the tax is imposed per measurement of sugar content.
  3.  We also recommend that the Parliament amends the Excise Duty Act to categorize non-alcoholic beverages products and to apply specific taxes to each category.

We propose a percentage increase that fruit and vegetable juice, except for juice made out of at least 50% of pulp from fruit and vegetables grown in Uganda.

  • Ministry of Finance
  • Ministry should make proposals to Parliament for amendment of the Excise Duty Act to impose taxes based on sugar content.
  • The tax is paid into centralized revenue and does not specifically fund any health initiatives. We recommend that the Ministry proposes for channeling at least 40% of revenue collected from HFSS taxes to fund health initiatives.
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