Health taxes are levied on products that have a negative public health impact, for example tobacco, alcohol and sugar-sweetened beverages (SSBs). These taxes are considered win-win-win policies because they save lives and prevent disease while advancing health equity and mobilising revenue for the general budget. They can also be used for specific priorities such as financing universal health coverage (UHC) or highly cost-effective yet underutilised population health measures.
The aim of health tax policy is to reduce the consumption of products deemed risk factors for noncommunicable diseases by making them less affordable through higher prices. This is achieved with regular tax increases large enough to result in real price increases greater than economic growth.
Excise taxes are the most effective tax measure for promoting health because they change the price a harmful product relative to other goods and can be easily increased over time.
Consumption is reduced best with taxes based on the quantity (known as specific taxes) of an unhealthy product (such as packs of cigarettes) or its unhealthy ingredient (such as pure alcohol or sugar) rather than taxes based on the product’s value.
Raising health taxes is a SMART policy because it:
Tobacco, alcohol and sugar-sweetened beverages taxes are all effective and cost-effective ways of reducing consumption, preventing diseases and injuries and saving lives.
Health taxes can be a revenue booster over the short and medium term. Importantly, health taxation is also more inclusive and pro-growth than alternative sources of revenue.
Addresses health inequities
In lower- and middle-income countries, lower socioeconomic status is associated with higher risk of noncommunicable diseases and higher rates of tobacco use and alcohol consumption. Accordingly, the net impact of health taxes is progressive once one fully accounts for the distribution of health benefits, income losses averted and reductions in catastrophic healthcare costs.
Reduces burdens on health systems
An ounce of prevention is worth a pound of cure: health taxes are also a high-return investment in averted healthcare expenditure and increased workforce participation.
Targets noncommunicable disease risk factors for the achievement of Sustainable Development Goals.
By targeting noncommunicable disease risk factors with health taxes, countries can progress their achievement of Sustainable Development Goal 3.4, which calls for a one-third reduction of premature mortality from noncommunicable diseases by 2030.
Countries are increasingly interested in using health taxes to achieve their health, revenue and equity objectives but require assistance with framing, designing, implementing and administering these measures. WHO’s response leverages its unique methodological expertise, technical capacity and country-level relationships established over more than a decade of work on tobacco taxation.
WHO divides its response into three interconnected areas of work.
- Technical assistance to help governments seeking to adopt, reform or evaluate health tax measures. This tailored assistance helps Member States address challenges raised by providing, for example, tax system diagnostics, country-specific modelling for the impact of health tax reforms and independent evaluations of industry arguments.
- Capacity building engages regulators and policymakers on an ongoing basis in their framing and prioritisation of health taxes including the development of plans for progressing, implementing and evaluating health tax policies.
- Global goods build on the latest evidence base to support country level work by defining best practices, guiding policy development, detailing technical requirements and providing data to support and benchmark policy progress.