Building upon the sugar beverage tax in Mexico: a modelling study of tax alternatives to increase benefits.

INTRODUCTION: In 2014, Mexico implemented a one peso-per-litre tax to sugar-sweetened beverage (SSB). Even though this tax reduced household purchases and predicted population health gains, the magnitude is lower compared with taxes implemented in other settings. In this study, we assessed what would happen if Mexico modified its existing tax to get higher benefits based on currently implemented taxes elsewhere. METHODS: For each tax scenario, we estimated net benefits as the difference between healthcare savings and lost jobs. We created hypothetical scenarios in which the current tax doubled or would be modified based on existing tax designs around the world including specific taxes (sugar-density or volumetric) and ad-valorem taxes. RESULTS: We found that the largest benefits would correspond to a tax increase of 7.4 Mexican pesos (0.45 US dollars (USD)) per SSB litre, following the current tax in Bahrain (the highest tax rate option). This tax is predicted to yield net benefits equivalent to USD 24.7 billion after 10 years of the tax redesign. We also found that sugar-density taxes can result in larger net benefits since, in addition to reductions in consumption associated with responses to prices, they induce product reformulation. Middle-income households are the most benefited group because they reported the highest baseline prevalence of obesity and the largest price elasticity. CONCLUSION: Policymakers should consider pursuing a tax reform adding to the current tax, with significant increases in prices linked to a sugar-density strategy to reach a higher benefit.

Cost-benefit analysis of alternative tax policies on sugar-sweetened beverages in Mexico.

In 2014, Mexico implemented a tax on sugar-sweetened beverages (SSB) equivalent to one Mexican peso (MP) per liter to address the high obesity prevalence. This tax has effectively reduced SSB purchases and yielded healthcare savings; however, it remains unknown whether SSB taxes lead to net benefits at the societal level in Mexico. Moreover, public health experts recommend increasing the tax. The objective of this study is to estimate the net benefits of SSB taxes compared to a scenario of no tax in urban Mexico. Taxes include the one-MP tax and alternative higher taxes (two and three MP per SSB liter). Thus, we conducted a cost-benefit analysis from the perspective of the government, producers, and consumers for a simulated closed cohort of adults in a life-table model. We defined net benefits as the difference between economic benefits (the value of statistical life, healthcare savings, and tax revenue) and costs (consumer surplus and profit losses). We found that, at the societal level, all simulated taxes will eventually generate benefits that surpass costs within ten years. Overall net benefits can reach USD 7.1 billion and 15.3 billion for the one-MP and the three-MP tax, respectively. Hence, these benefits increased at a declining rate compared to taxes. The government and consumers will experience overall positive net benefits among society's members. Policymakers should consider time horizons and tradeoffs between health gains and economic outcomes across different society members.

Simulating international tax designs on sugar-sweetened beverages in Mexico.

In response to the high prevalence of overweight and obesity, Mexico implemented a volumetric tax of one Mexican peso (MP) per liter of sugar-sweetened beverage (SSB) in 2014. In contrast to Mexico's volumetric tax design, the United Kingdom (UK) and South Africa (ZA) implemented SSB taxes based on sugar density. This kind of tax is likely to yield larger health benefits than volumetric taxes by imposing a larger tax burden on high-sugar SSB and/or encouraging reformulation. However, sugar-density taxes might yield lower tax revenues. This study aims to simulate the effect of sugar-density taxes as those in the UK and ZA on SSB purchases (in terms of volume and sugar), SSB prices, and tax revenue in Mexico and compare this effect to its counterpart under the current volumetric SSB tax. Additionally, we simulate the effect of sugar-density taxes under different scenarios of reformulation. We conducted all these simulations based on a structural model of demand and supply using household purchase data for 2012-2015 in urban Mexico. We found that the current volumetric one-MP tax led to an SSB purchase reduction of 19% for both volume and sugar and an SSB price increases by MP $1.24. We simulated similar effects under the UK and ZA sugar-density taxes when these taxes were equivalent to the volumetric one-MP tax, and there was no reformulation. When assuming reformulation, the sugar reduction under the sugar-density taxes was up to twice larger than the volumetric one-MP tax. However, we found that the volumetric one-MP tax yielded the largest tax revenue across all tax designs. From a public health perspective, sugar-density taxes are likely to be more effective in tackling the overweight and obesity prevalence in Mexico; however, tax revenue might be lower under these taxes.