Sri Lanka’s battle against NCDs: Is the Sugar-Beverage Tax doing enough?

By Priyanka Jayawardena

Priyanka Jayawardena

Non-communicable diseases (NCDs) lead to around 120,000 deaths in Sri Lanka each year, constituting 83% of the overall recorded deaths. The revised National Policy and Strategic Framework for the Prevention and Control of NCDs is a positive initiative by the government to address this. Such policies can play a crucial role in promoting healthier lifestyles, preventing NCDs, and improving overall public health. However, the question that lingers is, how effective are the existing measures, and where can we make improvements?

In the battle against NCDs, the government implemented a crucial policy in 2017 – the Sugar-Sweetened Beverage (SSB) tax. This tax aimed to curb the consumption of SSBs closely linked to health problems like obesity, diabetes, and dental issues. While this measure holds great promise, evaluating its effectiveness is difficult owing to data gaps. However, an IPS analysis of how SSB taxes are helping to reduce their consumption in Sri Lanka provides some initial insights.

The Case for Taxing SSBs

According to WHO 2019 estimates, diabetes is the second highest cause of death in Sri Lanka, accounting for 12,460 deaths. As rates of obesity and diet-related NCDs continue to increase, significant attention has been given to reducing the daily intake of sugar.

Taxing SSBs is a globally recommended option among evidence-based policy options to improve food environments. Research suggests several reasons for taxing SSBs, compared to other food products that contain free sugars. This is primarily due to the observed association between SSBs and NCDs, their high sugar content, and very little nutritional value.

By making these beverages more expensive, governments aim to discourage their consumption, ultimately leading to better public health outcomes. Beyond the health benefits associated with reduced SSB consumption, SSB taxes also raise revenue. When introducing the SSB tax in 2017, the government forecasted LKR 5 billion in revenue in 2018. Therefore, these taxes are recognised as a sensible way of reducing the incidence of NCDs.

Sri Lanka’s Sugary Drinks Tax

The effectiveness of the SSB tax can be influenced by its structure and rate. Higher tax rates are generally more effective in driving down consumption. In Sri Lanka, the SSB excise tax is imposed as a specific tax – i.e., applied on sugar content per 100 ml. By imposing higher costs on these beverages, the government intends to deter their consumption.

However, there is a factor that often goes unnoticed but can significantly affect the impact of SSB taxes – i.e., inflation. As the general price level of goods and services rises over time, the purchasing power of money decreases. This means that the same tax rate applied today might not have the same “real” value in the future due to the diminishing value of currency caused by inflation. On the other hand, as people’s average income per person goes up over time, specific tax rates have less impact over time.

Examining the timeline of SSB tax implementation in Sri Lanka reveals