Tax & Accounting Blog

Public Health and Indirect Tax in Latin America

Blog, Indirect Tax, ONESOURCE March 6, 2015

On behalf of Karen Heck

Obesity in Latin America has become an epidemic, with 56% of adults overweight or obese, compared with 34% of the world average. As a result, many countries in the region changed their tributary laws as a way to promote the consumption of healthy foods and inhibit the ingestion of sugary food and fat.

Mexico has one of the highest obesity rates in the world (37.2% of adults),  and in January 2014 it was a pioneer by increasing the tax on drinks containing sugar by 10%, and by 8% on foods rich in fat or sugar. At the end of the same year, Chile’s tax reform also included tax increases to sugary drinks from 13% to 18%. Colombia presented in February a proposal to increase the tax on processed foods high in fat, sodium and sugar.

These changes are in line with the sugar intake reduction proposed by the World Health Organization (WHO) guideline, published on March 4, in which the WHO recommends adults and children reduce their daily intake of free sugars to less than 10% of their total energy intake. The organization also recommends that governments restrict the advertising of processed foods and soft drinks to children and negotiate with the food industry to reduce sugar in their products.

Costa Rica, Uruguay and Brazil already have restrictions relating to the advertising of these foods to children, as well as a ban on sales of these foods in public schools. These governments are also considering legislative proposals to increase taxation on processed food related to obesity.

This kind of tax measure is controversial in whether it is effective or not, and whether it interferes with people’s habits of consumption. Nevertheless, we can observe a trend in Latin America in using taxation, not only to increase revenue, but as a tool to promote public policies fighting obesity and promoting general public health.

To learn more about:

Chile tax reform: http://reformatributaria.gob.cl

Colombia proposal: http://www.hsbnoticias.com/noticias/nacional/gobierno-plantea-subir-precio-de-gaseosas-para-combatir-obesidad-121015

Mexico tax law: http://losimpuestos.com.mx/resolucion-miscelanea-fiscal/

WHO guideline: http://www.who.int/mediacentre/news/releases/2015/sugar-guideline/en/