The Likely Fiscal and Public Health Effects of an Excise Tax on Sugar sweetened Beverages in Kenya

Abstract

Historically, non-communicable diseases (NCDs) have typically been associated with tobacco and alcohol use. However, in recent decades increased levels of overweightness and obesity, mostly caused by poor eating habits and a sedentary lifestyle, have increased diabetes, cancers, and cardiovascular diseases. There is a general agreement that sugar sweetened beverages (SSBs) are bad for one’s health. As such, measures to reduce their consumption would be expected to positively impact population health.

In this working paper, we develop and report on an Excel-based model, in which we simulate the impact of an SSB tax on the prevalence of overweightness and obesity. The model starts with a baseline scenario, which takes cognisance that a 10 KES specific tax already exists on all soft drinks. A sugar-based SSB tax is then introduced. The tax is levied as an amount per gram of sugar, with or without a tax-free threshold. Other than reducing the demand for SSBs, a sugar-based SSB also creates strong incentives for manufacturers to reformulate their products to reduce the sugar content. The model predicts that the average BMI would decrease across all age groups decreasing the prevalence of overweightness and obesity. The magnitude of the decrease in the prevalence of overweightness and obesity depends on the size of the SSB tax. For realistic and politically feasible values of the SSB tax, the prevalence of overweightness and obesity is expected to decrease by between 5 per cent and 10 per cent.

Should Kenya implement a sugar-based tax on SSBs, over and above the current excise tax on soft drinks, the government should clarify that such a tax aims to enhance public health; raising additional revenue should be a secondary consideration. Also, implementing a sugar based SSB tax should be part of a more comprehensive strategy to reduce overweightness and obesity, because by itself the impact of the tax is modest.