Paying Tax on Treats Is Worth It If It Means Improved Public Health – and the Gulf Countries Can Show How

Jonathan Gornall

AFP photo: Joel Saget

With the news that Oman will introduce so-called “sin taxes” from the end of September, Kuwait is the only remaining member of the Gulf Cooperation Council yet to do so, but says it plans to follow suit in 2020-2021.

The new taxes are hefty: 100 percent on tobacco and energy drinks and 50 percent on sugary carbonated drinks, and it is no secret that the primary motive for introducing them is a pressing need to transform economies transitioning toward the post-oil era.

In a report prepared for a meeting of GCC finance ministers in 2015 the International Monetary Fund argued that tax reforms were urgently required throughout the Gulf because “existing tax systems … are limited and do not meet rising budget financing needs in the context of a potentially prolonged period of low oil prices.” However, such taxes also present a valuable opportunity for interventions in public health. Within a month of the IMF report, the six GCC states had signed the Common Excise Tax Agreement, committing all six states to taxing goods that are “harmful to human health and to the environment.”

All six Gulf states have serious issues with lifestyle diseases such as obesity, diabetes and coronary heart disease, and anything that can improve the health of citizens should be embraced. By introducing sin taxes, however, they have waded into a controversial area of health policy that is dividing opinion in countries that have already gone down the same path. In the UK last week, Boris Johnson, the favorite to become the country’s next prime minister, announced he would impose a moratorium on “nanny state” policies that, he said, were unfairly targeting poor people with no evidence that they were effective. Whether that is true is far from clear, however.

Nevertheless, in Mexico, where 70 percent of the population is overweight and 70 percent of the added sugar in people’s diets comes from sugary drinks, consumption has dropped by almost 8 percent since a sugar tax was introduced in 2016. And in the UK, the government introduced a “smart” tax last year designed to encourage companies to reformulate products to bring sugar content down below a taxable threshold – and it has worked. To avoid having to hike up prices, many companies reduced the sugar in their drinks by half or more and almost overnight 45 million kilos of sugar were removed from the British national diet. In the first year, the tax yield on the products of companies that refused to play ball earned the public purse £240 million ($300.5 million) – money that the government plans to spend on improving sports facilities in schools.

This is the tack that has been adopted in the Gulf: the UAE government says it is imposing these taxes “to reduce consumption of unhealthy and harmful commodities while also raising revenues … that can be spent on beneficial public services.” The problem in the UK and other countries, where such obviously win-win initiatives are in danger of being dropped, is that public health has become a political football. Even as healthcare costs spiral out of control, right-wing think-tanks and politicians riding the wave of populist politics dismiss initiatives such as sin taxes as unwarranted nanny state interference with personal freedom.

The argument being put forward by Boris Johnson and others is that all so-called sin taxes are regressive – that is, they hit the poorest people the hardest. What that view chooses to ignore is that it is the health of the poorest that is hit hardest by the freedom of big business to exploit their poverty. As one public health expert told the British Medical Journal, those who argue against state intervention “see the manipulation of choice by commercial actors – for example, through advertising obesogenic products to children – as a welcome right that should trump any public-interest considerations.”

In other words, the financial health of companies and their shareholders should be prioritized at the expense of the physical heath of their customers.

The jury is out on whether taxes on harmful products can reverse rising rates of obesity and other diseases. Extensive computer modelling has predicted that they will, but it will be years before the effects can be definitively assessed. It is vital, therefore, that such interventions be given time to prove their worth, but around the world, such efforts are being constantly undermined.

As Margaret Chan, head of the World Health Organization, said recently, “It is not just Big Tobacco any more. Public health must also contend with Big Food, Big Soda and Big Alcohol. All of these industries fear regulation, and protect themselves by using the same tactics. They include front groups, lobbies, promises of self-regulation, lawsuits and industry-funded research that confuses the evidence and keeps the public in doubt.”

This is why the adoption of sin taxes by the GCC states represents a tremendous opportunity and one of incalculable potential benefit not only to the citizens and coffers of the Gulf states, but also to those of other countries struggling to defuse their own healthcare timebombs.

Unencumbered by the disruptive short-termism and cynical opportunism imposed by combative election cycles, the Gulf states offer a unique experimental environment in which the benefits of such public-health interventions can be tested and proved beyond doubt.

And for that, forking out a little bit more for a can of fizzy drink is surely a price worth paying.

Jonathan Gornall is a British journalist, formerly with The Times, who has lived and worked in the Middle East and is now based in the UK.