Economic effects of sugar tax and elasticities on sugar-sweetened beverages in Philippines

Abstract

Objective: In 2018, the Philippines imposed a tax of Peso 6 per liter of Sugar-Sweetened Beverages (SSB) to address the rising problem of obesity and its related medical conditions. This study evaluates the effect of the tax in terms of reduction in SSB consumption since the tax was implemented.

Methods: We use the nationally representative National Nutrition Survey (NNS) conducted bi-annually by Food and Nutrition Research Institute, Philippines. We use the rounds conducted in 2013, 2018 and 2019 to estimate own- and cross-price elasticities of the Sugar-Sweetened Beverages (SSB). First, we use the Quadratic Almost Ideal System (QUAIDS) to estimate the elasticity. We also provide elasticity estimation of carbonated beverages for each socioeconomic group, including age, gender, education, wealth quintiles and urbanity. Second, we use ordinary least squares (OLS) to estimate the reduction in consumption due to tax. We also use Tobit model, two-part model, and Heckman selection model to address data issues. We also conduct heterogeneity analysis by age, gender, education, occupation status, wealth quintiles, and geographical regions.

Results: For elasticity, we find that carbonated beverages have a price elasticity of -1.12 which is relatively less elastic than other taxed beverages. Consumption of carbonated beverages was relatively more price elastic among the lowest income quintile (-1.26), among rural dwellers, (-1.15), among children and adolescents (-1.98), among females (-1.15), and among those with lower educational attainment (-2.03). These estimates were consistent with existing literature. For tax evaluation, we find that in 2013, before the implementation of the tax, the average per-capita per-day consumption of SSBs was 339ml. After the tax, the average per-capita consumption declines by 70.89ml post-tax. The reduction was larger among males (73.61ml), among the poorest income quintile (48.83ml), those not in the labour force (112ml) and among the rural population (62.95ml).

Conclusion: The sweetened beverage tax is effective in reducing consumption of SSB and may alleviate the problem of obesity in the Philippines.