Sat, 15 May 2021

How Rwanda can use fiscal policies to improve health outcomes

The Conversation
20 Apr 2021, 22:42 GMT+10

Rwanda's health sector has seen many reforms over the past two decades, which have greatly improved public health indicators. Communicable diseases have declined and the maternal mortality rate fell from 1,071 deaths per 100,000 live births in 2000 to 210 in 2015.

But noncommunicable diseases are a growing problem. Overweight, obesity and associated nutrition related diseases are becoming more prevalent in Rwanda.

Globally, the rapid increase in consumption of sugar sweetened beverages has been identified as a major contributor to the rise of obesity and noncommunicable disease such as type 2 diabetes.

In several countries taxation on sugar sweetened beverages has emerged as a cost-effective strategy to combat obesity and noncommunicable diseases. Research has shown that people buy and consume sugary drinks less when their price is increased through taxation.

Rwanda has an excise tax of 39% on soft drinks. Its main purpose is to generate revenue. Because it applies to all soft drinks, irrespective of sugar content, the tax as it stands is unlikely to reduce consumption of sugary drinks.

We looked at what might influence the ability of the government to use the soft drinks tax to achieve public health goals.

We found that competing priorities stand in the way of imposing a sugary drinks tax. The government has progressive, cross-sectoral policies to address the growing burden of noncommunicable diseases. But other policies support the growth of local sugar production and the sugary drinks industry. And the country's food policies generally focus more on food production to make sure people have livelihoods and enough quality food.

Existing taxes

The existing excise tax of 39% on soft drinks is well above the 20% tax rate recommended by the World Health Organisation. But it hasn't had a significant impact on the price or consumption of sugar sweetened drinks compared to non-sugary beverages. This is likely because it applies equally to sugary and non-sugary carbonates.

Still, the tax is a good starting point for policies that put public health first.

The position and economic importance of the sugar sweetened beverage industry in Rwanda is likely to be a barrier to the adoption of such taxation. This has been the case in many low- and middle-income countries. Concerns about the economic and job implications of a sugary drinks tax may hinder or delay the adoption of such a policy. Opponents of a sugary drinks tax in South Africa argued that it would result in significant job losses - despite evidence to the contrary. The country increased taxes on sugar-sweetened beverages in 2018.

Read more: How South African food companies go about shaping public health policy in their favour

The East African Community can influence markets and companies through trade mechanisms and coordinated regulations. Its secretariat has a technical working group on excise tax coordination. So, interventions at a regional level could be another way of achieving the public health goals.

The policy landscape related to sugary drinks taxation in Rwanda is influenced by many factors and is evolving. The existing policy landscape, at domestic and regional levels, provides opportunities to strengthen sugary drinks taxation. But these are matched by a complex political landscape with competing priorities. Action must be taken to improve support for this intervention and the successful adoption of a policy.

Recommendations

We believe the government could use soft drinks tax more effectively as a public health tool without undermining employment and national development. Producers could redesign their production or invest in more healthy products.

It will need the cooperation of government ministries, regulatory authorities, civil society and consumer organisations, as well as academia and research institutions. The East African Community could also play a part by adopting regional regulations.

The role of private actors, such as the beverages industry, in the development of nutrition-related health policies should remain limited to avoid undue influence.

Rwanda should amend the excise tax to target sugar content so that people reduce their consumption of sugary drinks and turn to healthier options.

Different taxes linked to the sugar content of beverages should be adopted such as the ones adopted in countries like Mexico, the United Kingdom and South Africa. These resulted in increased prices of sugary drinks and encouraged producers to reformulate their products to reduce the sugar content.

Author: Mulindabigwi Charles Ruhara - Deputy Dean and Coordinator of Postgraduate Programmes, School of Economics, University of Rwanda The Conversation

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