NOTES FOR TABLES AND FIGURES
SSBs: sugar-sweetened beverages
PPP: purchasing power parity
ml: milliliters
... data not reported/not available
− data not required/not applicable
+ The internationally comparable brand selected for sugar-sweetened carbonated drinks is regular Coca-Cola®.
* Local currency codes: According to International Organization for Standardization, ISO 4217 currency names and code elements (https://www.iso.org/iso-4217-currency-codes.html).
Country data availability: Data is only available for countries that completed the PAHO SSB tax survey, i.e. all PAHO Member States in Latin America and the Caribbean except Argentina, the Bahamas, the Plurinational State of Bolivia, Costa Rica, Haiti, and Nicaragua.
Brazil: Retail price and tax data and tax information represent only the State of Rio de Janeiro. However, all indirect taxes applied on sugar-sweetened beverages in Brazil are applied at the federal level, except the value-added tax, which rate varies by state. Data, estimates, and information published could not be approved by national authorities.
Dominica: Data, estimates, and information published could not be approved by national authorities.
Venezuela (Bolivarian Republic of): Tax data and information were approved by national authorities. However, retail price data could not be approved by national authorities.
Combined: At least one category of SSBs is taxed by an ad valorem excise tax and at least one other category is taxed by an amount-specific excise tax. No beverage category is taxed by both. Dominica applies an ad valorem excise tax except for sugar-sweetened carbonated drinks, which are subject to an amount-specific tax (volume-based). Ecuador imposes an amount-specific tax (sugar-content-based) on SSBs with a sugar concentration above a specified threshold, and an ad valorem excise tax on SSBs below this threshold. All energy drinks (regardless of their sugar concentration) are taxed by the ad valorem tax.
El Salvador and Mexico: Energy drinks are subject to a mixed excise tax system; i.e., taxed by both an ad valorem and an amount-specific component.
Uruguay: The excise tax on SSBs is structured as an ad valorem tax applied on fixed tax base amounts—“precios fictos”—per volume varying per beverage type, effectively operating as an amountspecific tax (volume-based) and classified as such in this brochure.
Chile and Peru: Tiered design with different ad valorem tax rates defined by sugar concentration thresholds.
Mexico: Additionally, an ad valorem component applies only to energy drinks.
El Salvador: Additionally, an amount-specific (volume-based) component applies only to energy drinks.
Uruguay: The fixed tax base amounts—“precios fictos”—are usually adjusted annually; however, it is not mandated by law.
ABOUT THE SSB TAX SURVEY
The PAHO SSB tax survey was conducted online between March and December 2019 as part of the PAHO NCD Country Capacity Survey 2019. It was completed by officially nominated ministry of finance practitioners from 27 Latin American and Caribbean PAHO Member States (all except Argentina, the Bahamas, the Plurinational State of Bolivia, Costa Rica, Haiti, and Nicaragua).
Data collected
Survey respondents were asked to provide information on tax structures, bases, rates, and supporting legislation, as well as nominal retail price data, and products information (volume size, sugar content, and country of origin). The cutoff date for the tax information and legislation was 31 March 2019.
Other data sources
- Tax legislation already collected through existing PAHO/WHO monitoring tools were also analyzed, as well as legislation obtained through searches on websites of parliaments, ministries of finance, and legal databases.
- International Monetary Fund World Economic Outlook database for implied purchasing power parity conversion rates for 2019 (25).
- International Monetary Fund International Financial Statistics database for exchange rates for March 2019 (26).
- United Nations Comtrade database for the latest available cost, insurance, and freight (CIF) values (27).
Validation process
Final estimates and indicators were sent to the respective governments for review and sign-off between June 2020 and April 2021. In cases where national authorities requested changes, the requests were assessed according to both the legislation and the clarification shared by national authorities, and data were updated or left unchanged. In cases where national authorities explicitly did not approve the publication of the data, this is specified in the notes.
TAX SHARE INDICATORS
The following definition and methods are based on and adapted from WHO’s monitoring of tobacco taxes (21).
Definition
The total tax share is the estimated share of all indirect taxes in the final retail price of a beverage. It is calculated by aggregating the proportion of the final retail price that corresponds to each type of indirect tax, as follows:
Total Tax Share = Svat + Sas + Sav + Sid + So [eq 1]
Where Svat, Sas, Sav, Sid, and So represent respectively the share of value-added taxes (VAT) or sales taxes, amount-specific excise taxes, ad valorem excise taxes, import duties, and other taxes in the final retail price.
Methods of estimation
Valued added tax (VAT) or sales tax
In most countries, the VAT rate is applied on the VAT-exclusive retail price.
Svat = VAT% / (1 + VAT%) [eg 2]
Amount-specific excise tax
The amount-specific excise tax is applied:
- per beverage volume (volume-based)
Tas = (Volume beverage x Tax per taxable unit volume) / Taxable unit volume [eq 3]
- per sugar content(sugar-content-based)
Tas = (Sugar content x Volume beverage x Tax per gram sugar per tax unit volume) / Taxable unit volume [eq 4]
In both cases, the share of amount-specific taxes in the final retail price can be expressed as follows:
Sas = Tas / Final retail price [eq 5]
Ad valorem excise tax
The ad valorem excise tax rate Tav% is applied on a tax base, which varies per country and between locally produced and imported beverages. The share of ad valorem excise taxes in the final retail price can be expressed as follows:
Sav = (Tav% x M) / Final retail price [eq 6]
- Locally produced beverages
In most cases, the tax base M is the final retail price, the final retail price excluding VAT, the final retail price excluding VAT and excise, and it is relatively straightforward to estimate it. However, when the tax base is set earlier in the value chain, such as the producer price (as in Barbados, Brazil, Dominica,1 Mexico,2 and Paraguay), it can be expressed as follows:
M = [Final retail price / (1 - VAT%) - Tas - pi] / (1 + Tav%) [eq 7]
Where pi represents the retailer's and the wholesaler's profits, which are unknown in most cases. Due to lack of market data, it was arbitrarily assumed total distribution margins to be equal to 20% for all countries using the producer price as tax base.
Notes:
1 In Dominica, the ad valorem component is not applied on sugar-sweetened carbonated drinks. Also, no excise taxes apply on fruit drinks, sugar-sweetened milk drinks, and bottled water.
2 In Mexico, the ad valorem component is only applied on energy drinks.
- Imported beverages
In most countries, the base consists of the CIF value and import duties and other taxes, if applicable.
Import duty
In most countries, import duties are ad valorem and applied on the CIF value. In the case of preferential trade agreements, if import duties information is not provided by survey respondents, the lowest possible import duties are assumed.
Sid = (Tid% x CIF) / Final retail price [eq 8]
Other taxes
Other taxes are either applied as an amount-specific or ad valorem tax. Amount-specific other taxes are calculated by volume or the quantity of a certain type of container. Their share of the final retail price is estimated in a similar way as amount-specific excise taxes (see Equations 3 and 5). Ad valorem other taxes are generally applied on a base equal to the final retail price or the final retail price excluding some or all taxes for locally produced beverages and to the CIF value for imported beverages. Their share of the final retail price is estimated in a similar way as ad valorem excise taxes (see Equation 6).
DEFINITION OF INDICATORS
Price in international dollars (at PPP)
Prices are converted into international dollars (at PPP). This hypothetical currency is used to compare prices between countries with different currencies and purchasing power. One international dollar would buy in a given country a comparable amount of goods and services one United States dollar would buy in the United States.
Excise tax share
Sum of ad valorem and amount-specific excise tax shares.
Total tax share
Sum of all tax shares, including excise taxes, VAT or sales taxes, import duties, and other indirect taxes as applicable.
Type of excise tax applied
This indicator informs if excise taxes are amount-specific, ad valorem, a mix of the two, a combination of the two, or if no excise taxes are applied.
Uniform excise tax applied
This indicator informs whether a uniform excise tax system is in place, consisting of a unique excise tax rate for all taxed beverages, or a tiered excise tax system, where variable rates apply based on selected criteria of beverages.
Excise tax based on sugar content
This indicator informs whether excise taxes are applied based on sugar content (e.g., applied only on beverages over a particular sugar concentration threshold or applied proportionally to beverages’ sugar content). This is recommended in countries with strong tax administration.
Retail price used as base for ad valorem component
This indicator informs whether or not ad valorem excise taxes are applied on the retail price (or the retail price excluding VAT or the retail price excluding VAT and excise). Ad valorem excise taxes applied on a base set earlier in the value chain (e.g., producer price) are applied on a lower tax base. In addition, a base set closer to the retail price is easier to determine.
Amount-specific tax component automatically adjusted for inflation
This indicator captures whether the legislation mandates that amount-specific excise taxes be periodically automatically adjusted for inflation (or another economic indicator). Periodic automatic adjustments provide protection against erosion of the real value of amount-specific excise taxes.
Minimum amount-specific tax applied
This indicator informs whether there is a minimum amount-specific excise tax applied in excise tax regimes relying on an ad valorem component. A minimum amount-specific excise tax provides protection against unhealthy products being underpriced.
Excise tax applied on powders, concentrates, or syrups
This indicator captures whether excise taxes apply on at least one of the following products: powders, concentrates, and syrups used to produce SSBs by mixing them with water or carbonated water. All forms of free sugars are considered a risk factor as indicated in the WHO Guideline: Sugars Intake for Adults and Children (28), therefore it is recommended to include such products in the list of taxed products.
Price dispersion
Share of the final retail price of the cheapest brand of sugar-sweetened carbonated drink in the final retail price of the internationally comparable brand of sugar-sweetened carbonated drink, for the same volume size. The higher the proportion, the smaller the gap between both prices.
Minimum price policy implemented
This indicator captures whether a policy mandating the lowest price at which specific beverages can be sold is applied.
Excise tax revenue
This indicator reports the annual amount of excise tax revenue from SSBs in local currency units.
Earmarked excise tax revenue
This indicator captures whether a portion or the totality of excise tax revenue is earmarked for health purposes.
Reported use of earmarked excise tax revenue
Detailed information reported by survey respondents on how the earmarked excise tax revenue for health purposes is used.
PRODUCTS
Sugar-sweetened carbonated drink
Beverage containing carbonated water, free sugars added by the manufacturer, and natural or artificial flavoring. A sugar-sweetened carbonated drink may also contain caffeine, colorings, preservatives, and/or other ingredients.
Fruit drink
Processed sugar-sweetened juice or nectar (<100% concentration). Beverage containing water, unpasteurized or pasteurized juice, free sugars (both naturally present in fruit juices and fruit juice concentrates and/or added by the manufacturer), and may also contain artificial or natural flavorings, preservatives, and/or additives.
Energy drink
Beverage containing large amounts of caffeine, added sugars, other additives, and legal stimulants such as guarana, taurine, and L-carnitine.
Sugar-sweetened milk drink
Beverage containing dairy milk and added sugars, usually flavored and it may also contain thickeners.
Bottled water
Packaged water, used as the non sweetened beverage comparison.
TAXES
From a public health perspective, the objective of taxation policies on NCD risk factor commodities (tobacco products, alcoholic beverages, and SSBs) is to reduce their consumption; for this reason, the tax share indicator is limited to indirect taxes.
Value added tax (VAT) or sales tax
Tax on all goods and services applied proportionally to the price the consumer pays for a product or service.
Excise tax
Tax on a selected good produced for sale within a country or imported and sold in that country. In general, the tax is generally collected from the manufacturer or wholesaler or at the point of entry into the country by the importer, in addition to import duties.
- Amount-specific excise tax
Comes in the form of an amount based on volume or sugar content (e.g., $1 per liter or $1 per 10 g of sugar).
- Ad valorem excise tax
Comes in the form of a percentage of the value of a transaction between two independent entities at some point of the production/distribution chain (e.g., 10% of producer price).
Import duty
Tax on a selected good imported into a country to be consumed in that country. In general, this tax is collected from the importer at the point of entry into the country.
Other indirect taxes
Tax that is not an excise tax, import duty, VAT or sales tax, but that applies to either the quantity of a product or to the value of a transaction of a product (e.g., environment levy).
More detailed methodological notes are available at: https://iris.paho.org/handle/10665.2/54917
LIMITATIONS
The estimates presented in this topic are subject to some limitations, which are largely due to data availability constraints and the necessity to have standardized and comparable indicators across countries and beverage types.
Standardization of volumes
Beverage volume sizes collected were not always equal to the sizes requested (nevertheless, the mode of their distribution was). For comparison purposes, volume sizes were standardized to the volume size requested assuming a linear transformation of retail prices. However, as the container size of a beverage increases, its price per milliliter tends to decrease. Therefore, the tax share and other price indicators estimations may have been altered.
National representativeness of prices
In countries where national market share data were not available, survey respondents were instructed to consult vendors to select the most sold brand. This could have potentially led to the selection of most sold brands that may not be nationally representative. In addition, the final retail price data used were collected from one supermarket or hypermarket usually in the capital city of the country, therefore potentially not nationally representative. Finally, retail prices from other store types were not taken into account in this analysis, even though such store types may represent a significant market share in some countries.
CIF value
The definition of some of the tariff codes used is broad and could contain other beverage types (e.g., HS code 2009, which contains fruit drinks but may also contain fruit juices).
In addition, the brand of interest may not be the only one traded between two given countries under a given tariff code for a given year. The total value and volume traded may contain trade information for other brands. However, as the brand selected for each beverage type for which the tax share indicator is calculated is the most sold brand, the CIF value obtained by dividing total traded value by total traded volume should be representative of the selected brand.
Distribution margins assumption
The estimation of the share of ad valorem excise taxes in the final retail price for locally produced beverages requires making an assumption on the total distribution margins for countries using the producer price as tax base. Due to lack of market data, such assumption was made arbitrarily and may lead to overestimation or underestimation of tax share estimates. However, based on our analysis, total tax share estimates are only slightly sensitive to different levels of distribution margins mark-up assumption. In addition, this assumption is applied to all countries using the producer price as tax base, therefore allowing for comparisons of tax share estimates among them.
Tax legislation cutoff date
Data and information presented in this analysis are based on legislation that was in effect as of 31 March 2019. Legislations that could have been replaced, amended, or repealed since this cutoff date are not analyzed to maintain comparability of data at the same point in time in all countries.