Tax on sugary drinks in Brazil: Simulation of impacts on the purchases of non-alcoholic drinks and family welfare

Abstract

The objective of this study is to simulate possible impacts of adopting sugary drinks tax policies on the purchases of non-alcoholic beverages and on Brazilian family welfare, aiming to contribute with empirical evidence for Bill No. 2183, of 2019, pending in the Federal Senate, also known as CIDE-Soft Drinks. To simulate different tax scenarios, price and expenditure elasticities of non-alcoholic beverages were measured using the QUAIDS model with adaptations for zero expenditure and expenditure and price endogeneity problems. Based on the Household Budget Survey data of 2017–2018, three scenarios of fiscal policies were simulated: (1) adoption of a 20% tax on sugary drinks (CIDE-Soft Drinks); (2) adoption of a 20% tax on the price of sugary and sweetened drinks; and (3) a 20% tax on sugary drinks combined with a 41.51% subsidy on water price aiming at a neutral revenue. The results show that scenario 3 would provide greater reductions in the purchase of sugary drinks and stimulate the consumption of water. The effects of this kind of tax are greater for low-income families.