CONSUMPTION of sugar-sweetened beverages, such as regular soda, fruit drinks, sports and energy drinks, sweetened waters, pop, cola, tonic fruit punch, lemonade, sweetened powdered drinks, and coffee and tea beverages with added sugars, is a major public health problem globally. For example, soft drink intake is associated with increased obesity and increased health problems, such as type II diabetes, kidney diseases, tooth decay, cardiovascular diseases, and gout.
Keeping other things identical, if people consume sugar-sweetened beverages on a daily basis, they can gain weight by around 5 pounds in a year. One who drinks one to two cans daily possesses a 26 per cent higher risk of developing type II diabetes mellitus disease with other metabolic syndromes, which can culminate in a premature death. Sugar-sweetened beverage consumption is also found to be associated with adolescents鈥� poor mental health, including stress, depression, and suicidality.
The consumption of sugar-sweetened beverages is increasing in Bangladesh, especially among children and youth. The total volume of soft drinks sold in Bangladesh (both on-trade and off-trade) grew at an annual average rate of 6.9 per cent during 2011鈥�2018. The Bangladesh Demographic and Health Survey 2022 reported that 32 per cent of children aged 6鈥�23 months were fed a sweet beverage in the last 48 hours prior to the survey. The real prices of sugar-sweetened beverages decreased in 2004鈥�2018, leading to increased affordability and consumption of sugar-sweetened beverage over the period. A recent study shows that household expenditure on beverages and sugar-added drinks is around 2 per cent of monthly household expenditure. However, the spending on beverages and sugar-added drinks is alarming due to the displacement of household expenditure for essential commodities, including food, clothing, housing, education, and energy.
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SSB taxation
SEVERAL fiscal policies have been recommended by the World Health Organisation to reduce the consumption of sugar-sweetened beverages. There is comprehensive evidence that increasing the price of sugar-sweetened beverage through taxation reduces sugar-sweetened beverage consumption, especially when the baseline consumption levels are high. A recent study estimated that the price elasticity for soft drinks was -1.17. This implies that if the price of soft drinks increases by 10 per cent via taxes, the quantity consumed of these beverages would reduce by 11.7 per cent. This is consistent with a number of previous studies. For example, the price elasticity for soft drinks was found to be -1.06 in Mexico and -1.37 in Chile. The greater price sensitivity among people consuming soft drinks indicates that a tax-induced price increase would generate larger public health gains.
The continuous growth in sugar-sweetened beverage consumption can be harmful for public health. The availability of SSBs at an affordable price will encourage uptake among children, youth, and the poor, resulting in larger adverse health consequences for future generations. Raising prices by imposing appropriate sugar-sweetened beverage taxation can be an effective tool for reducing sugar-sweetened beverage consumption in Bangladesh, thereby decreasing obesity and health care expenditure.
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Structure of SSB taxation
THE sugar-sweetened beverages that are domestically produced in Bangladesh are taxed by two general taxes: (a) value-added tax, which is levied at a single rate of 15 per cent; and (b) supplementary duty for domestically produced sugar-sweetened beverages is 25 per cent for carbonated beverages and 35 per cent for energy drinks. Supplementary duty on imported sugar-sweetened beverages is 150 per cent. Bangladesh can potentially make major public health gains by adopting appropriate taxation on sugar-sweetened beverages. However, like many other countries, the current sugar-sweetened beverage taxation in Bangladesh is low, and the true costs of sugar-sweetened beverages arising from public healthcare expenditures and other societal costs from excessive intake are not reflected in current market prices for sugar-sweetened beverages. There also remain tax differences between domestically produced and imported soft and energy drinks and across malt beverages, fruit juices, and flavoured sweetened milks, which allows consumers to switch to low-priced products as close substitutes in Bangladesh. Sugar-sweetened beverages are available in multiple-sized packs or bottles, making them affordable to consumers. All these factors might undermine the expected effects of sugar-sweetened beverage taxation on the country.
A recent study suggests that the demand for sugar-sweetened beverages is responsive to price changes. Hence, a considerable increase in the prices of sugar-sweetened beverages through taxation will result in a marked reduction in sugar-sweetened beverage consumption and will also increase government revenue. However, the effectiveness of sugar-sweetened beverage taxation will largely depend on the appropriate tax structure and proper implementation. The tax structure should be designed to limit the scope of switching to lower-priced varieties of sugar-sweetened beverages, and the tax must be annually adjusted for inflation and income growth to be consistent with the real value of sugar-sweetened beverage prices. A complex tax structure with multiple tax rates may also pose administrative challenges for revenue generation due to widespread tax avoidance among producers and consumers, resulting in a limited effect of tax increases on reducing sugar-sweetened beverage consumption.
Similar to many other countries, sugar-sweetened beverage needs to be defined properly, and the classification of sugar-sweetened beverages in the policies and strategies should distinguish between drinks with and without added sugar. This is also important for designing taxation for diverse types of sugar-sweetened beverage products. A standard classification of sugary drinks based on sugar content and other ingredients can be defined. The ministry of health and family welfare and Bangladesh Standards and Testing Institution can take the initiative to agree on the鈥檓aximum鈥� amount of sugar and other ingredients to be used in sugar-sweetened beverages. Similar to tobacco products, a health development surcharge on sugar-sweetened beverages can be imposed, and the amount raised from the health development surcharge can be used for obesity control and other related diseases. Lessons can be learned from the existing health development surcharge on tobacco products.
Moreover, similar to tobacco, a health development surcharge can be imposed on sugar-sweetened beverage. Drawing lessons from Thailand and Australia, Bangladesh can also explore the possibility of forming a 鈥楬ealth Promotion Foundation鈥� and use this dedicated tax from sugar-sweetened beverage (and also tobacco) as an innovative financing mechanism for health promotion.
It is important to note that raising taxes may not lead to an increase in prices, and the tax structure, which determines the type of tax imposed on the products and how it is collected, can make a significant difference in how a tax increase raises the prices of these products. Developing efficient and effective tax administration is therefore important to ensure that the impact of health taxes is maximised and not undermined by tax avoidance and evasion, including illicit trade.
Along with high sugar-sweetened beverage taxation, non-price measures, including mass campaigns, awareness-raising, and innovative interventions, need to be designed and implemented to reduce the information asymmetry, thereby decreasing sugar-sweetened beverage consumption in Bangladesh.
Sugar-sweetened beverage control needs to be prioritised in the government鈥檚 policy and practice, and a multisectoral approach is required to reduce sugar-sweetened beverage consumption. It is important to raise sugar-sweetened beverage prices through increased taxation in order to reduce sugar-sweetened beverage consumption and ensure public health gains in Bangladesh.
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Rumana Huque, a professor of economics at the University of Dhaka, is executive director of the ARK Foundation.
