A quest for a Healthy Tax Reform in Chile

This week on PLOS Translational Global Health, Sebastián Peña, MD, MSc, from the Department of Health, Municipality of Santiago discusses the Coordination of the Front for a Healthy Tax Reform.

Chile is undergoing the largest tax reform since the return of democracy in 1989. The goal is to increase the tax revenue in $8,200 million to finance a deep educational reform that will provide free, public and quality education for all.

Flickr / geezaweezerIn this context, the Government of Michelle Bachelet has included a raise in sugar-sweetened beverages (SSBs) and alcohol as “corrective taxes”. The reform seeks to increase an existing ad-valorem tax on non-alcoholic beverages of 13% to 18% for sugar-sweetened beverages. Alcohol taxes would change from its current structure (15% for beer and wine and 27% for spirits) to an ad-valorem base tax of 18%, 0.5% extra per each degree of alcohol content and 0,03 monthly tax unit per litre of pure alcohol. This would result in a raise of 7-23% in tax, affecting more alcoholic beverages with higher alcohol content and cheaper prices, the latter resulting from the per unit tax.

Reactions against these taxes where almost immediate. The day after the announcement, a Senator argued that the alcohol tax was a “grave to the small producers of pisco [a spirit produced from grapes]”. A few days later, Andrónico Luksic, owner of Chile’s largest alcohol producer Compañia Cerverías Unidas -, expressed his concerns about the raise in alcohol taxes. Soon after, 8 MPs signed an agreement to request President Bachelet to drop alcohol taxes to protect the producers of pisco. Flickr / geezaweezer

Taking into account this scenario, a group of public health professionals started to discuss the need to take action to demand a raise in SSBs that would effectively reduce consumption (from 13% to 33%, as suggested by PAHO), to prevent alcohol taxes to be dismantled completely from the reform and to request including a significant raise in tobacco taxes. Perhaps more importantly, our main objective is to bring to the forefront the role of Governments in the health of populations and the use of taxes as cost-effective ways to reduce consumption of alcohol, tobacco and SSBs and the resulting death, disability, low productivity and violence.

With these objectives in mind, we created the Frente por una Reforma Tributaria Saludable (Front for a Healthy Tax Reform). An invitation was sent to a wide range of organizations from the civil society, professional associations, scientific societies and colleagues to join the Front. Currently, the Front consists of 13 organizations including well-known academic institutions, NGOs, trade unions, parents and medical associations and scientific societies. The advocacy work has been divided in three areas: media, parliament and civil society and we have organized three massive twitter events (#ReformaTributariaSaludable), written several columns in national newspapers and blogs, given an open letter for the Minister of Finance and met with the Minister of Health and several members of the Parliament.

Flickr / Latin America for LessThe day after our first Twitter event, the Minister of Finance gave up to pressure from the MPs and agreed to eliminate the per unit tax, resulting in a 50% drop in the alcohol raise. As compensation, the Government introduced a tobacco tax that would only result in a 1% price rise.

Our advocacy work has continued and we are starting to see some results. 50 MPs signed a petition for the Government to raise SSBs taxes to 30% and include a tax on all sugary and salty products. Later and following our proposal, the request has been to include a tax on all processed foods with an energy density higher than 275 Kcal/100 grs, following the recommendations of the World Cancer Research Fund and the experience of Mexico.

But this is a big fight and the opposition, fierce. Two weeks ago Coca-Cola, Nestlé, Compañia Cervecerías Unidas and Carozzi announced the creation of a coalition to fight the raise in corrective taxes. El Mercurio, Chile’s largest newspaper wrote an editorial arguing against “healthy taxes” as effective means to reduce consumption. In their opinion, education was instead a much more effective way.

Flickr / antifluorThe quest for a healthy tax reform in Chile is ongoing and now the discussion has moved to the Senate. The public health community is organized to challenge the economic and political power of the food, alcohol and tobacco industry. To what extent we will succeed remains to be seen.

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Dr Sebastián Peña is a Chilean MD with a European MSc International Health. He is Chief of Quality Unit, Department of Health, Municipality of Santiago and currently a visiting scholar with the National Institute for Health and Welfare, Finland. Follow his work via Twitter - @spenafajuri.

This blog represents the views and ideas of Dr Sebastián Peña.

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A quest for a Healthy Tax Reform in Chile by Translational Global Health, unless otherwise expressly stated, is licensed under a Creative Commons Attribution 3.0 Unported License.

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