Evaluating the 2014 sugar-sweetened beverage tax in Chile: An observational study in urban areas

Abstract

Background

In October 2014, Chile implemented a tax modification on sugar-sweetened beverages (SSBs) called the Impuesto Adicional a las Bebidas Analcohólicas (IABA). The design of the tax was unique, increasing the tax on soft drinks above 6.25 grams of added sugar per 100 mL and decreasing the tax for those below this threshold.

Methods and findings

This study evaluates Chile’s SSB tax, which was announced in March 2014 and implemented in October 2014. We used household-level grocery-purchasing data from 2011 to 2015 for 2,836 households living in cities representative of the urban population of Chile. We employed a fixed-effects econometric approach and estimated the before–after change in purchasing of SSBs controlling for seasonality, general time trend, temperature, and economic fluctuations as well as time-invariant household characteristics. Results showed significant changes in purchasing for the statistically preferred model: while there was a barely significant decrease in the volume of all soft drinks, there was a highly significant decrease in the monthly purchased volume of the higher-taxed, sugary soft drinks by 21.6%. The direction of this reduction was robust to different empirical modelling approaches, but the statistical significance and the magnitude of the changes varied considerably. The reduction in soft drink purchasing was most evident amongst higher socioeconomic groups and higher pretax purchasers of sugary soft drinks. There was no systematic, robust pattern in the estimates by household obesity status. After tax implementation, the purchase prices of soft drinks decreased for the items for which the tax rate was reduced, but they remained unchanged for sugary items, for which the tax was increased. However, the purchase prices increased for sugary soft drinks at the time of the policy announcement. The main limitations include a lack of a randomised design, limiting the extent of causal inference possible, and the focus on purchasing data rather than consumption or health outcomes.

Conclusions

The results of subgroup analyses suggest that the policy may have been partially effective, though not necessarily in ways that are likely to reduce socioeconomic inequalities in diet-related health. It remains unclear whether the policy has had a major, overall population-level impact. Additionally, because the present study examined purchasing of soft drinks for only 1 year, a longer-term evaluation—ideally including an assessment of consumption and health impacts—should be conducted in future research.

Trial registration

ClinicalTrials.gov Identifier: NCT02926001

Abstract

Ryota Nakamura and colleagues present findings from an observational study of sugar-sweetened beverage purchases in Chile after a tax change.

Author summary

Why was this study done?

• Chile and other countries in the world are facing a major challenge to curb rising rates of obesity and diet-related ill health, often particularly among lower socioeconomic groups.

• Fiscal policy has the potential to influence consumption patterns towards healthier options (and raise government revenue for welfare-enhancing purposes), thereby contributing to the prevention of chronic diseases and to the reduction of the associated economic costs.

• Most existing evidence on the effects of fiscal incentives to promote diet-related health relies on small-scale experiments or hypothetical simulations using price elasticity estimated from observational data, largely suggesting that increasing the price of products such as sugar-sweetened beverages (SSBs) would reduce purchasing or consumption. There is, however, a scarcity of empirical evaluations of actual diet-related fiscal interventions, and it is still uncertain whether these can be effective in improving population diet and health in a ‘real world’ context.

What did the researchers do and find?

• This study evaluates the tax policy applied to SSBs in Chile. The ‘Impuesto Adicional a las Bebidas Analcohólicas’ (IABA; or ‘additional tax on nonalcoholic drinks’), which was announced in March 2014 and implemented in October 2014. The IABA policy targeted any nonalcoholic beverages to which colorants, flavourings, or sweeteners have been added. For beverages with an added sugar concentration of 6.25 grams per 100 mL (or equivalent proportion) or more, the tax was increased from 13% to 18%, while for those below this threshold, the tax was decreased from 13% to 10%, producing an 8% tax difference.

• We applied a series of econometric approaches to evaluate the effects of the announcement and implementation of the tax policy, using household-level grocery-purchasing data from Chile for 3 years pre- and 1 year post-tax implementation.

• We find that, despite the fact that the tax incentive is comparatively small, there are signs that purchasing of SSBs with higher sugar content has been reduced among high socioeconomic groups of the population.

What do these findings mean?

• The results suggest that the Chilean tax policy may have been partially effective, though not necessarily in ways that are likely to reduce socioeconomic inequalities in diet-related health.

• Longer-term evaluations are needed to analyse the effect on SSB purchasing in the long run as well as on health outcomes.

• The evaluation did not involve a randomised design, therefore the degree to which we can interpret the results as truly causal will be limited.