To Improve Global Health, Tax the Things That Are Killing Us

The world is going through a huge health transition, where the problems of the 6bn people who live in emerging markets are increasingly the problems of the 1bn people in rich countries. For the first time in history, more people suffer from eating too many calories than too few. Improving global health is no longer primarily about combating infectious diseases.

On Thursday, Mike Bloomberg and I announced a task force on fiscal policy for health. We are bringing together fiscal policy, development and health leaders from around the globe, including ministers of finance, to address the enormous and growing health and economic burden of non-communicable diseases (NCDs) in lower and middle income countries (LMICs). The hope is to identify underused fiscal policy tools to lighten that burden.

Given the human and economic toll, the prevention of non-communicable diseases — cancer, cardiovascular disease, chronic lung disease and diabetes — should be of great interest to us all. The statistics on the big three culprits are staggering:

• Tobacco use contributes to 7m deaths annually
• Obesity contributes to 4m deaths annually
• Alcohol consumption contributes to 3.3m deaths annually

Fiscal measures, in the form of taxes, are underused, yet we know they work for two important reasons. First, prices of goods matter especially to younger and poorer populations. People, particularly the poor, will buy less if the price is higher. Second, taxes on certain goods can be educative and signal disapproval.

Nothing illustrates this more than gains we have seen from taxing tobacco over the past 50 years in the US and other countries. In Brazil, when tobacco taxes increased 116 per cent (in real terms, i.e. adjusted for inflation) between 2006 and 2013, sales decreased by 32 per cent and tax revenue increased 48 per cent. Countries such as Mexico have had great success with fiscal tools and sugar. A one peso per litre tax on sugary beverages resulted in a nearly 10 per cent reduction in consumption after two years.

I would venture to say that sugar is where tobacco was in 1972; the dangers have been recognised and pointed up but not much is happening — yet — to reduce the demand.

Behavioral economic considerations have indicated that taxes are more potent than we may have supposed. Beyond the direct effects of higher prices in discouraging consumption, taxes send a signal of social disapproval. No one wants to be the only one eating dessert at a group restaurant meal. So through social multipliers higher taxes discourage emulation of risky behaviours.

The task force will examine the growth of NCDs in LMICs and the evidence to support excise tax policies and develop policy recommendations on fiscal policies for health. While NCDs are the leading cause of death worldwide and a barrier to development, only about 1 per cent of global health funding is aimed at preventing them. The World Health Organisation predicts major economic loses — $500bn a year and growing — for LMICs if NCDs are not addressed.

Ministers of finance shape tax policy — a powerful tool to reduce the harmful use of these products. But we also know that the ministers have many competing priorities. Viewed through a public health lens, tackling NCDs can easily be seen as someone else’s issue. Our task force aims to help ministers of finance around the globe understand the importance of their role in setting effective tax policies to save lives in their countries.

Taxes are what make a government function. Taxing “bads” such as tobacco and sugar over taxing “goods” like savings and income is as close to a free lunch as you can get in economics. This is low hanging fruit to make people’s lives better and make the world a better place.