World Bank: Taxation on harmful products will primarily benefit low-income families in Brazil

New policy note provides recommendations on how to tax tobacco, alcohol, and sugary drinks to reduce mortality and improve government revenue

BRASÍLIA, OCTOBER 23^rd, 2024 - Brazil has a unique opportunity to improve public health by properly planning the taxation of tobacco, alcohol, and sugary drinks. A new policy note from the World Bank provides technical recommendations on how to structure and implement these taxes to achieve significant progress in public health and tax revenue.

The ongoing tax reform in Brazil, enabled by Constitutional Amendment 132, presents an opportunity to do so. This can be achieved through the Selective Tax in the Complementary Law currently under discussion in the Senate, and the Ordinary Law that is expected to be presented to Congress in 2025.

Every year, approximately 341,000 deaths in Brazil-accounting for about 20% of all deaths-are attributable to the consumption of tobacco, alcohol, and sugar-sweetened beverages. These products are major contributors to cardiovascular disease, cancer, diabetes, and chronic pulmonary diseases. The implementation of excise taxes on these harmful products is a proven strategy to deter and reduce their consumption, thereby preventing these deaths.

The new document underscores that the prices of tobacco products, alcoholic beverages, and sugar-sweetened beverages in Brazil are relatively low compared to those in similar countries in the Latin America and Caribbean (LAC) region and G20 countries. These low prices make these products extremely affordable for Brazil's population, contributing to high consumption rates. The policy note recommendations aim to support Brazil in achieving substantial public health benefits and increased tax revenues.

From a health perspective, reducing the consumption of these products will lead to a significant decrease in preventable deaths and diseases. Despite the anticipated decline in consumption, the country will still be able to collect higher tax revenues from these taxes.

The poorest households will benefit the most from this policy. Low-income populations are more sensitive to price changes, and a significant price increase driven by the implementation of well-designed health taxes will substantially reduce consumption of these products among this group. Currently, most deaths from these causes are concentrated in low-income households. As a result, most health benefits-such as prevented deaths, diseases, and disabilities-will occur in these households.

Brazil has a valuable opportunity to improve public health and economic outcomes through strategic taxation, and it is crucial to seize it. Implementing well-designed health taxes will save countless lives, enhance human capital, and boost productivity.