Part Three. What works: the evidence for action
Chapter Two. Review of effective interventions
Tax and price interventions
Taxation is one policy instrument for reducing the use of tobacco and intake of foods that are high in fat, sugar and salt. Alternatively, subsidies can be used to promote healthy choices or reduce the cost of goods and services that promote physical activity. Taxation policies can contribute effectively to the reduction of tobacco use and raise revenue for health promotion and disease prevention programmes, as shown in the Australian state of Victoria and subsequently in several other countries, including Thailand.
Price increases encourage people to stop using tobacco products, they prevent others from starting, and they reduce the number of ex-tobacco users who resume the habit. A 10% price increase in tobacco products has been shown to reduce demand by 3-5% in high income countries, and by 8% in low and middle income countries. Young people and the poor are the most responsive to price changes. Taxation of tobacco products is also very cost-effective (as assessed by the WHO-CHOICE project). Prices affect food choices and consumption patterns, and food and drink taxes also have the potential to generate revenue which can be earmarked for diet, activity and obesity-prevention initiatives.
In some countries, higher prices have been shown to reduce consumption of soft drinks. In Zambia, for example, sales of branded soft drinks dropped dramatically after prices rose. Alternatively, subsidies can encourage healthier food choices. Studies have shown, for example, that price subsidies in schools and in workplaces increase fruit and vegetable consumption.