Meeting Health Challenges in Developing Asia with Corrective Taxes on Alcohol, Tobacco, and Unhealthy Foods

In developing Asia there is potential for higher corrective taxes to help prevent many non-communicable diseases (NCDs) and contribute revenue. The productivity loss from death and disability from alcohol, tobacco and diets high in sugar-sweetened beverages in purchasing power parity dollars is PPP$ 879 billion (2 percent of Developing Asia GDP) with close to half these costs arising in China (PPP$ 431 billion), and another 20 percent in India (PPP$ 187 billion). Corrective taxes applied to these products can be a powerful tool to reduce harmful consumption. But effective implementation needs to consider tax design, demand responses, distributional consequences, and the use of corrective tax revenues including the costs and benefits of earmarking revenue to the health sector. It is estimated that corrective taxes, primarily on alcohol and tobacco, could raise an additional 0.6-0.7 percent of GDP in revenues, while improving health outcomes and cutting medical costs.

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