The views expressed in this presentation are the views of the author and do not necessarily reflect

the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development
Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences
of their use. Terminology used may not necessarily be consistent with ADB official terms.

Obesity and Fiscal Policies:

Tax Policy Design and Health Impact

Matthias Helble
Senior Economist, Co-Chair, Research Department
Asian Development Bank Institute
16/07/2018

Copyright © 2016 by Asian Development Bank Institute. All rights reserved.

What we know about obesity?
Prevalence and Determinants
Asia-Pacific is becoming fatter...
Overweight Obesity
.6

.6
Prevalence rate

Prevalence rate
.4

.4
.2

.2
0

East South East South Central Pacific 0 East South East South Central Pacific

1990 2000 1990 2000

2013 2013

Source: Global Burden of Disease Study, 2013 (simple average)

3
Main determinants:
• Biological factors (ex. age, genetic predisposition)
• Education and individual preferences
• Social factors (ex. being married, behavior of peers)
• Economic growth (more food at relatively cheaper price available)
• Urbanization (Asia latecomer in urbanization)
• Economic transformation (higher degree of services’ industry)
• Food transition (ex. availability of softdrinks, fast food)

4
The Costs of Obesity
in Asia and the Pacific
Costs of overweight and obesity (BMI ≧ 25)

Direct costs:
Higher health care costs (medical expenditures) for the
person and health care system.

Indirect costs:
All costs due to absenteeism from work, lower productivity
at work, disability costs and costs due to higher mortality.

Total Costs = Direct Costs + Indirect Costs

6
 Costs of Overweight and Obesity
• Few studies for developing Asia
• Some recent studies:

Author(s) Country Year Type of cost Costs as % of health Absolute costs

spending

Zhao et al, 2008 PRC 2003 D+I 3.7 % 2,74 billion USD
Ko, 2008 Hong Kong 2002 D+I 8.2–9.8 % 430 million USD
Lee et al, 2012 Korea, Rep. 2011 D - 2,13 billion Won
Lee et al, 2015 Korea, Rep. 2013 D+I - 6,77 billion Won
Chung, 2017 Korea, Rep. 2013 D - 0,54 billion Won

Pitaya. et al, 2014 Thailand 2009 D+I 1.5 % 725 million USD

Source: Helble and Francisco (2017)

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Direct costs in Asia and Pacific
Main data challenges:
• Few countries with data on costs of medical procedures
• Few countries with household level data on medical
expenditures available

Solution:
• Collect sparse data and check for correlation with deflators,
e.g. GDP per capita.
• Approximation of direct cost based on existing data for
developed countries (e.g. Japan) and adjusted for lower GDP
per capita.

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Direct Costs in South East Asia

% of Total Health
Country Value (USD) Care % of GDP
Brunei 76,900,000 16.27 0.43
Cambodia 2,415,455 0.27 0.02
Indonesia 450,000,000 1.68 0.05
Lao PDR 1,429,996 0.66 0.01
Malaysia 1,090,000,000 8.40 0.34
Myanmar 5,002,899 0.39 0.01
Philippines 145,000,000 1.17 0.05
Thailand 640,000,000 3.80 0.15
Viet Nam 53,500,000 0.44 0.03

Source: Helble and Francisco (2018)

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Indirect costs of overweight and obesity
• Based on the disability-adjusted life year (DALY) metric from the
2010 Global Burden of Disease (GBD) study.
• DALYs measure the life lost due to premature death (mortality) as
well as the time lived with disability (morbidity).
• Calculated as the sum of years of life lost due to premature
mortality (YLL) in the population and the equivalent of healthy
years lost due to disability (YLD):
= +
• DALY represents a year loss of healthy life.
• Method developed by Institute for Health Metrics and Evaluation
(IHME)
10
Indirect costs of overweight and obesity

Diseases included in DALYs:

Risk Factor Proportion from Real contribution of
Disease
Attribution (%) Total DALY (%) BMI>=25 to DALY (%)
1 Ischemic heart disease 15.63 6.76 1.06
2 Stroke 19.56 8.73 1.71
3 Diabetes 40.99 3.19 1.31
4 Liver cancer 9.99 2.26 0.23
5 Breast cancer 11.86 0.54 0.06
6 Esophagus cancer 14.59 0.86 0.13
7 Gall bladder & Biliary tract can. 11.28 0.15 0.02
8 Hypertensive heart disease 29.83 0.96 0.29
Total 4.79
Source: Helble and Francisco (2017)

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Indirect costs for South East Asia
Country DALY all Contribution Productive % of health Percentage
diseases of years lost care expend. of GDP
overweight due to
& obesity obesity
Brunei 72,185 0.81 585 5.5 0.1
Cambodia 5,736,940 0.31 17,795 2.0 0.1
Indonesia 72,340,657 1.05 1,771,258 10.4 0.3
Lao PDR 2,635,899 0.42 11,002 8.1 0.2
Malaysia 63,836,217 0.09 59,586 4.9 0.2
Myanmar 19,078,657 0.52 99,270 9.0 0.2
Philippines 28,205,496 0.73 204,948 4.6 0.2
Thailand 19,075,344 0.47 89,665 3.3 0.1
Viet Nam 21,840,038 0.27 58,439 0.9 0.1
Source: Helble and Francisco (2018)

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Download for free:

https://www.adb.org/publications
/wealthy-unhealthy-overweight-
and-obesity-asia-and-pacific-
trends-costs-and-policies
Fiscal Policies to Fight Obesity
Multifaceted Policies to Curb Obesity
Improve intake of food and nutrition:
• Healthy school foods
• Regulate advertising of unhealthy foods
• Nutritional labelling
• Zoning of restaurants
• Taxes on unhealthy foods (ex. sugar tax)
Promote physical activity and healthy lifestyle:
• Make physical activity easier, safer, and more attractive
• Reduce TV watching and videogaming
• Use new technologies (e.g. Pokemon Go)
• Incentive schemes in health insurance

15
Consumption of SSB is growing fast…
SSBs Consumption per capita (2009=100)
180

170 167.0

160 156.2

150 147.9

139.3
140
131.7
130
121.9
120 115.7

110 107.9

100
100

90

80
2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Kularathna and Hettiarachchi (2018)

Price of Foods

Source: Powell et al. (2013)

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Rational for fiscal policy intervention

• Over-consumption of SSB leads to high economic costs.

• Over-consumption creates negative externalities that are not
accounted for in the market price.
• A tax helps to internalize the negative externalities (“Pigouvian”
tax would set equal the tax equal to the social cost)
• Fiscal instruments change the relative price which change the
consumption choice.
• Impact on consumption depends on the price elasticity of
demand. (The change in consumption as a result a change in
price).

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Fiscal Policies
• WHO Technical Report on Fiscal Policies on Diet:
• Fiscal policies can promote healthier diets
• Strongest evidence for taxes on sugar-sweetened
beverages (SSB tax)
• Tax rate of 20% or more will change consumption
patterns significantly
• Studies on US suggest elasticity of around 1 (i.e. for each
10% change in price, a -10% change in consumption).
• Low and middle-income groups show strongest reaction
(Powell, 2009)
Asian Countries with SSB Taxes or Plans
Obesity (adult Overweight
Countries SSB Policy Status
2016) (adult 2016)

China 6.2% 32.3% Discussing option of introducing SSB tax

Brunei Darussalam 14.1% 41.2% Implementing tax on SSB (2017)

Maldives 8.6% 30.6% Has import tarrifs on energy and soft drinks

Sri Lanka 5.2% 23.3% Implemented SSB tax in Novmeber 2017

Thailand 10.0% 32.6% SSB tax in place (2017)

Indicated interest and Initiated discussion on possible
Indonesia 6.9% 28.2%
SSB taxation
India 3.9% 19.7% Excise tax on SSB
Passed legislation and now implementing SSB taxation
Philippines 6.4% 27.6%
(2017)
Modelling initiated and recommendations in place for
Vietnam 2.1% 18.3%
design and implementation of SSB tax
Singapore 6.1% 31.8% Discussion on SSB tax
Malaysia 15.6% 42.5% Discussion on SSB tax

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Pathways for the effect of fiscal policy interventions

Source: WHO (2015)

21
SSB Tax in Thailand

Source: Thai Ministry of Health and Ministry of Finance (2018)

22
Fiscal policy development and implementation
framework

23
Source: WHO (2015)
Impacts over time

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Conclusion

• SSB taxes can correct negative externalities and help people align their
behavior with their long-term preferences for health.
• Taxes may harm the profitability of companies that primarily produce
less-healthy food and present administrative costs.
• SSB tax revenues can be earmarked to improve the health care system.
• Effects on health will only be seen in medium to long-run.
• Monitoring and evaluation of SSB tax is important to know effectiveness.
• Policy coherence needed (education strategy, limiting marketing for
children, etc.)

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Many thanks.

Questions?