Sweet tax — has it helped?

Muscat: Governments worldwide have been increasingly exploring fiscal measures, such as excise taxes, to address public health concerns related to the consumption of unhealthy foods and beverages high in sugar, salt, or fat.

The rationale behind these taxes is that increasing the price of these products will discourage consumption, potentially leading to improved dietary habits and health outcomes. Oman has implemented such taxes as part of its public health strategy.

Oman introduced excise taxes on specific goods, including certain unhealthy items, as part of its commitment to public health and diversifying government revenue. An initial phase of excise tax implementation began in June 2019, primarily targeting tobacco products, energy drinks and carbonated drinks.

A subsequent expansion in July 2020 broadened the scope to include other sweetened drinks and specific food items deemed unhealthy, such as chips, certain types of chocolate and biscuits. The tax rates applied vary, with a common rate of 50 per cent on sweetened drinks and 100 per cent on products like tobacco and energy drinks.

The primary intended effect of imposing excise taxes on junk food and soft drinks is to reduce their consumption. By increasing the retail price, these products become less affordable for consumers.

“Economic theory suggests that demand for goods typically decreases as prices rise, especially if consumers can substitute them with cheaper alternatives. In the context of unhealthy foods and drinks, the hope is that consumers will either reduce their overall intake of these items or switch to untaxed, healthier options like water, unsweetened beverages, fruits, or vegetables,” said an economic researcher.

He said that beyond reducing consumption, these taxes are intended to generate revenue for the government. ‘This revenue can potentially be earmarked for public health initiatives, such as health education campaigns promoting healthy eating and active lifestyles, or for subsidising healthier food options, further supporting the public health goals,” he said.

Evidence from various countries that have implemented similar taxes on sugar-sweetened beverages and unhealthy foods generally indicates a reduction in the sales and consumption of the taxed products. The magnitude of this reduction can vary depending on factors such as the tax rate, how the tax is passed on to consumers, the availability of untaxed substitutes and the price sensitivity of the population.

While the immediate impact on purchasing decisions is primarily financial, the tax policy itself can contribute to raising public awareness about healthy versus unhealthy choices. However, the impact is not always straightforward.

Regarding the impact on health consciousness, while the tax primarily works through price mechanisms, it can contribute indirectly. The public discourse surrounding the introduction of such taxes often highlights the health reasons behind them, which can increase awareness. Moreover, if the tax revenue is used to fund health promotion programmes, this can directly contribute to educating the public and fostering greater health consciousness.

“Consumers might switch to untaxed, but still unhealthy, alternatives. The effect on overall calorie intake or nutritional quality of diets can therefore be complex and requires careful evaluation. I know many people who still take unhealthy taxed drinks just like before. Here I mean 100 per cent on products like tobacco and energy drinks,” Abdullah al Khaldi, a parent said.

So far, there is no specific data on the long-term impact of Oman's excise tax on consumption patterns and health outcomes. However, based on international experience, it is reasonable to expect that the tax has led to some reduction in the consumption of the taxed items in Oman.

But for some, such taxes have made a difference. “I used to drink one energy drink daily but ever since the prices went up, I have tried to reduce. Now I just buy them whenever I come across them, maybe once a week only. So, I would say tax increase has impacted my intake, Therefore, these taxes serve as a tool within a broader public health strategy aimed at improving dietary habits and promoting health awareness in Oman,” said Sufian Jamal, a private sector employee.