A latest report by the World Health Organization (WHO) says that taxing sugary drinks can lower consumption and reduce obesity, type 2 diabetes and tooth decay.
The report titled Fiscal Policies for Diet and Prevention of Non-communicable Diseases (NCDs) proposes fiscal policies that lead to at least a 20 per cent increase in the retail price of sugary drinks.
It adds that this would result in proportional reductions in consumption of sugary drinks, resulting in lower intake of “free sugars” and calories, and therefore, improve nutrition.
“Consumption of free sugars, including products like sugary drinks, is a major factor in the global increase of people suffering from obesity and diabetes,” Douglas Bettcher, director of WHO’s department for the prevention of NCDs, says.
“If governments tax products like sugary drinks, they can reduce suffering and save lives. They can also cut healthcare costs and increase revenues to invest in health services.”
Problem of obesity
In 2014, more than 1 in 3 (39 per cent) of adults worldwide aged 18 years and older were overweight.
The worldwide prevalence of obesity more than doubled between 1980 and 2014, with 11 per cent of men and 15 per cent of women (more than half a billion adults) being classified as obese. An estimated 42 million children under 5 years were overweight or obese in 2015. Almost half of these children lived in Asia and 25 per cent in Africa.
“Nutritionally, people don’t need any sugar in their diet. WHO recommends that if people do consume free sugars, they keep their intake below 10 per cent of their total energy needs, and reduce it to less than 5 per cent for additional health benefits,” Francesco Branca, director of WHO’s department of nutrition for health and development, says.
The report presents outcomes of a mid-2015 meeting of global experts convened by WHO and an investigation of 11 recent systematic reviews of the effectiveness of fiscal policy interventions for improving diets, preventing NCDs and a technical meeting of global experts.
Some countries have already taken fiscal measures to protect people from unhealthy products. These include Mexico, which has implemented an excise tax on non-alcoholic beverages with added sugar and Hungary, which has imposed a tax on packaged products with high sugar, salt and caffeine levels.
Countries, such as the Philippines, South Africa and the United Kingdom have also announced their intention to implement taxes on sugary drinks.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.