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A tax increase always generates controversy. But when countries apply the “taxes to sin”, the discussion tends to go far beyond mere economic arguments.
Also known as taxes on vices, these are taxes that affect products considered negative for health, such as alcohol, tobacco and sugar.
The defenders of this tax burden argue that it reduces harmful practices at the individual and social level and, in addition, contributes with resources to the fiscal coffers.
“Taxes on sin are an important tool to combat social problems, ” says Jonathan Gruber, an economist at the Massachusetts Institute of Technology (MIT).
“It’s proven that people smoke less when prices go up,” he says.
In fact, the French government announced last month that it will raise the tobacco tax, since in other countries, such as the United Kingdom, the policy has worked .
The pack of 20 cigarettes currently worth about US $ 8, will reach almost US $ 12 in the next three years.
According to the World Health Organization (WHO), tobacco kills more than 7 million people a year , of which more than 6 million are direct consumers and about 890,000 are people who do not smoke, but who have been exposed to other people’s smoke
“Tobacco taxes are the most effective means to reduce consumption, especially among the young and the poor,” says the agency.
According to their studies, a 10% increase in the tax reduces tobacco use by approximately 4% in high-income countries and 5% in low- and middle-income countries.
The sweet Latin American example
The tax on sugar, as a way to fight obesity, is another example of “sin” that has been worthy of special taxes.
And although there have been experiences of all kinds in the world, but in Latin America, the cases of Chile and Mexico stand out to defend the results of the greater tax burden.
A study by the University of Chile indicates that since 2014 -the year in which a tax on sugar-sweetened beverages was approved- its consumption was reduced by 22% in the country.
And in Mexico, a country with high obesity and diabetes that also approved a tax on sugary soft drinks in 2014, the total consumption of soft drinks fell by 12% in the first year of its implementation.
For the rest, Peru recently increased the tax on beers, soft drinks, cigarettes and fuels because the social cost of diseases associated with the consumption of these products is equivalent to about 11% of the annual GDP, according to the government.
And, as far as food is concerned, apart from sugar, selective taxes have also been applied in some countries to high-fat foods that are harmful to health.
That happened in Denmark in 2011. But a year later the government eliminated it when they found that many people simply bought butter in Germany or Sweden.
While Scotland became at the beginning of the year the first country in the world to implement a minimum price for the sale of alcohol , to try to combat their drinking problems.
But not everyone agrees with this type of policy.
“Encourage the black market”
Indeed, the debate on taxes on sin usually points in two directions: the damage that products generate in people and the cost that it causes to society, what economists call “negative externalities.”
But those who oppose this type of measure argue that in practice, tax increases generate contraband and discriminate against people with lower incomes because they spend a greater part of their salary on the taxed products.
“These taxes punish the poorest, ” says Chris Snowdon, a researcher at the Institute of Economic Affairs in London, told BBC News.
“My objection is that they are regressive and discriminate against people based on lifestyle choices,” he explains.
A regressive tax is one that hits hardest families with fewer economic resources and in this sense, taxes on sin are unfair because the poorest tend to spend more on alcohol, tobacco and sugary drinks as a percentage of their income, argues Snowdon.
And that is not the only reason why the economist opposes these taxes.
“They do not achieve their paternalistic objectives very effectively, unless the products are taxed at a high punitive rate, which encourages the black market ,” warns Snowdon, for whom these taxes also undermine individual freedom of the people.
And before the health arguments, there are also economists who say that in reality, those who contract chronic diseases due to alcohol, tobacco or excess sugar do not imply such a high cost to the health system of the countries because they die earlier and they charge less pensions .
Other experts, however, defend the strategy.
“The benefits of taxes depend on the profile of consumption in each country,” explains Rachel Nugent, coordinator of the working group on chronic diseases of the medical journal The Lancet, which published several studies on the subject.
“And the poorest are not always necessarily the most affected by these taxes,” he says, explaining that vulnerable groups benefit from this type of taxes because they lower consumption and delay the onset of chronic diseases.
There are also places like Philadelphia, in the United States, that use the money collected from the sugar tax on social programs, as a way to mitigate the regressive effect.
And John Cawley, an economist at Cornell University, heavy drinkers, smokers and consumers of sugar put pressure on the health system and therefore, generate negative effects that have to take over the entire society as a whole.
“I think we should tax the things that generate costs to society,” he told BBC.