How’s your appetite for taxes?


  • Business
  • Saturday, 08 Jul 2017

It takes fairness and transparency to sell the sugar tax as a weapon against obesity

ABOUT a year ago, Health Minister Datuk Seri Dr S. Subramaniam said his Ministry was considering pushing for a tax on “sugar-sweetened beverages”. He added that this would depend on whether the removal of the sugar subsidy had reduced sugar consumption.

When the Government announced in October 2013 that it would abolish the subsidy of 34 sen per kg, it explained that the move was to help Malaysians deal with the threat of diabetes.

So far, nothing has been made public on the impact of the higher price of sugar. Neither has there been any update on the tax proposal. But there have been other developments that may nudge the idea closer towards reality.

For one thing, a growing number of countries have either introduced taxes that target the use of sugar, particularly in drinks, or are thinking of doing so. So strong is the momentum that BeverageDaily.com, an online news service that covers the beverage industry, has dubbed 2016 as the year of the sugar tax.

A nearby example is the Philippines, where an excise tax on sugary drinks is part of a proposed tax reform programme that has so far made it halfway through the Congress.

Meanwhile, Malaysia’s weight problem isn’t going away and that has supplied a health rationale for such a tax.

The Institute for Public Health’s National Health and Morbidity Survey 2015 found that the prevalence of obesity among the country’s adults were 17.7%, while 30% were classified as overweight. Among children, the national prevalence of obesity was almost 12%.

Here’s something to bear in mind: In 2014, 13% of adults worldwide were obese.

“As the number of people with obesity increases, the nation now is facing an upward surge of non-communicable diseases such as diabetes and cardiovascular diseases,” said the institute in the report.

“The alarming trend of the obesity epidemic in Malaysia does not only require immediate revision of public health policies, but to provide supportive environment and communities for Malaysians to work towards practising healthier lifestyle.”

And lately, there have been new research on the toll of obesity. There were at least two such reports last month.

The Economist Intelligence Unit’s Tackling Obesity in Asean says Malaysia’s total costs of obesity (represented as a percentage of national healthcare spending) is the highest among the six countries covered in the study. The other countries are Indonesia, the Philippines, Singapore, Thailand and Vietnam.

According to the report, workers with obesity-related conditions in these six countries effectively contribute to the economy for between four and nine productive years less than the working-age population average.

The Asian Development Bank Institute looked at 42 Asia-Pacific countries and has estimated that the total costs caused by obesity to be 12% of total health care expenditures or 0.78% of the region’s GDP. “Obesity is thus a serious threat to the prosperity of the region and calls for urgent action,” say the authors of the study.

If Malaysia agrees that there should be urgent action, we may soon see a sugar tax. Such a proposal has been floating around for some years now.

The Health Ministry’s National Strategic Plan for Non-Communicable Disease (NCD), published in 2010, argued for economic policies that “reinforce healthy lifestyle choices through pricing, taxation, subsidies and other market incentives”.

After setting up an Obesity Task Force to look at potential policy options to combat obesity in Malaysia, the Academy of Sciences Malaysia issued a report in 2013 that question the impact of initiatives such as healthy lifestyle programmes and campaigns in curbing obesity.

The academy recommended ‘hard policies’ such as regulations or fiscal policies (for example, imposing a tax on unhealthy foods and removal of subsidies). The report singles out sugar-sweetened beverages and sweetened creamer as items that should be taxed.

Another Health Ministry document, the National Plan of Action for Nutrition of Malaysia III (2016-2025), incorporates the academy’s suggestion on the tax. The plan targets the imposition of the tax by 2020.

If the Government goes ahead with the sugar tax, that implies that the removal of the sugar subsidy hadn’t worked, although that step was also a policy option mooted by the academy.

Can we tax our way to better health? People can argue that the excise duty on cigarettes and liquor reduces smoking and drinking, but even if that’s indeed the case, there’s a clear link between the problems and the items on which tax is levied.

When a person smokes, he smokes cigarettes or other tobacco products; there’s nothing else legal that can be smoked that isn’t taxable. And all alcoholic beverages are subject to the excise duty.

That’s harder to establish with the sugar tax. Is the sugar in the Malaysian diet primarily from sugar-sweetened beverages and sweetened creamer? To sell the tax as a necessary tool to tackle obesity, people must be convinced that it will lead to the lower consumption of sugar and that it won’t be an unfair burden.

Of course, it doesn’t help the case if it turns out that the abolishment of the sugar subsidy had been a dud in the war against obesity.

And there’s also the need to overcome skepticism over such a tax, that it’s more about boosting government revenue than to improve health. The key is to show that there are measurable and demonstrable benefits to be reaped.

Perhaps it’ll be a long time before the Government decides that it wants to introduce the sugar tax. But such a decision must come after a vigorous and open debate on the subject.

Nobody likes a new tax, but what’s worse is a new tax that’s imposed without wise and patient stakeholder consultation and an airing of the facts and arguments that matter.

Executive editor Errol Oh is thankful that he doesn’t have a sweet tooth.


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