Price impact of taxes on sugary drinks in Brazil

Abstract

Sugary drink consumption is an important contributor to the current global epidemic of obesity. In recent years, 50 countries or jurisdictions have implemented taxes on sugary drinks as an instrument to discourage consumption. Against the tide, Brazil reduced taxes on these beverages in 2017 and 2018. However, a recent debate - raised by the federal government - has started over taxation of sugary and alcoholic beverages (sin taxes). The effectiveness of this policy will depend on how the taxes are transferred to prices. In this sense, this paper we aim to quantify the impacts of the tax reduction on prices of sugary drinks in Brazil, and therefore to contribute to the debate by calculating the pass-through of taxes to prices of these products in the Brazilian context. We analyze the Brazilian market using a panel data of products, by brand, collected by Euromonitor from 2013 to 2018. Our results suggest that the transfer of taxes to prices depends on the firm size and the type of product, with pass-through rates ranging from 15% to 124%.

Keywords: Difference-in-differences; Sugar-sweetened beverages; Tax incidence.