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Latin America and the Caribbean face the weakest economic growth of any region and some of the highest public debt levels. Government deficits increase and geopolitical tensions, including tariffs on Mexico and other countries that have imposed the administration of Donald Trump, add more uncertainty. In this context, governments are dealing with a limited fiscal space to face current challenges, including climate change, artificial intelligence and now protectionism. As a result, the fiscal resources available for the benefit of health are well below the level necessary to address the growing health crisis in the region. A possible way to raise funds that continues to be very little exploited are health taxes.
Few policy instruments have both potential to increase income and taxes for the benefit of health. According to the high -level work group on fiscal policy for health, of which we both are part, increase taxes enough to raise tobacco prices, alcohol and sugary drinks by 50% would generate 41,820 million US dollars in Latin America and the Caribbean every year. This is equivalent to almost 20% of the current annual health expenditure of the region. These additional income could be reinvested in the health system to provide essential services such as maternal and child care, management of chronic diseases and cancer treatments.
However, the economic benefits of health taxes are only part of history. These taxes have the potential to address the growing crisis of noncommunicable diseases in the region, such as cancer, diabetes and cardiovascular diseases, which are the main cause of mortality in the region. The consumption of tobacco and second -hand smoke charged more than 350,000 lives in 2021, with more than 40% of cases of respiratory cancer in the region attributable to tobacco consumption. In addition, these health effects have indirect economic implications that continue to affect the expenditure of the health system. In Chile, tobacco cost the government almost 2,000 million dollars a year in direct costs, which represents 8.1% of the country’s annual health expenditure. By reducing consumption, increasing taxes for health would significantly reduce the incidence of noncommunicable diseases. In fact, the increases in taxes that raise the price of these harmful products in 50% would save 50 million lives in the next 50 years worldwide.
Several countries in the region have an outstanding history in the use of taxes for the benefit of health. Colombia tripled tobacco taxation between 2016 and 2019. Before this, it had the cheapest cigarettes in the West after Paraguay. The effect was immediate: by 2018, cigarette consumption had fallen 34% and additional tax revenues helped in financing an expansion of health services. In Chile, tobacco taxes increased to a notable 75% of the final price of the package in 2016, which contributed to a reduction in the prevalence of smokers from 40.6% in 2010 to 33.3% in 2017.
Despite the overwhelming health and economy arguments in favor of increasing taxes for the benefit of health, tobacco products in Latin America and the Caribbean remain affordable and have even become more affordable over time. However, taxes for the benefit of health have few economic disadvantages compared to other taxes: they do not put economic growth at risk or affect employment rates. The approval of the Tax on Sugar Drinks in Colombia in 2022, for example, was the third of a series of tax increases for the benefit of health by successive governments of different sides of the political spectrum. In addition, surveys consistently show broad support for taxes in this aspect by the majority of the population. The political economy to increase taxes for the benefit of health is usually more manageable than for other taxes, mainly because the opposition is limited to certain industries and younger generations tend to support policies that promote healthy lifestyles. Those responsible for generating policies must take advantage of this feeling in favor of increasing taxes for health benefit.
Several Latin American countries already seem to be attending to this call: the governments of Colombia and Brazil are currently discussing increases in taxes to increase health, and Barbados has just announced a new food for food with a high salt content. Those responsible for these discussions to consider solid arguments in favor of increasing taxes for the benefit of health. Given the fiscal challenges of the region, it is no longer a matter of Yeah taxes must be increased, but which. Taxes for the benefit of health offer a unique political solution for income and health itself.
