Levies on unhealthy products reduce disease and heal the budget deficit

Composite image shows gambling cards and chips, fast food, and bottles of alcohol

Terry Slevin – PHAA CEO

As a result of the pandemic that has changed our lives, some are suggesting that an undeniable response from government will be greater investment in public health.  Those closer to decision makers within governments are suggesting the costs incurred due to the pandemic will result in unprecedented belt tightening. We propose the introduction and expansion of health levies that both improve public health and help address government budgets.

The human toll of chronic diseases in Australia is unacceptable. These include – cardiovascular diseases, cancer, diabetes and chronic respiratory diseases and are the leading causes of death and disability in Australia. Furthermore, they carry a huge cost that extends beyond health to undermine quality of life, education, workforce productivity, and economic prosperity.

The risk factors which contribute the most burden include tobacco use, being overweight (including obesity) dietary risks, high blood pressure and alcohol use.

Programs aimed at individual-level education and healthy eating are limited in effectiveness – wider far-reaching population-wide policies and measures are necessary if population gains are to be realised.

Health taxes levied on products that have a negative public health impact, such as, tobacco, alcohol and sugar-sweetened beverages (sugary beverages) are considered a win-win-win. Health taxes ae a high-return investment which save lives and prevent disease while advancing health equity, averting healthcare expenditure and increase workforce participation and boost revenue for the general budget.

The aim of health taxes is to raise awareness, reduce the consumption of unhealthy products and reduce the associated negative health impacts. It will also be a key component of building back better after COVID-19, as additional resources are needed to finance economic recovery.

We know that health levies reduce consumption (and therefore sales) of products that harm our health.

That is why tobacco, alcohol and the sugary beverage industries object to and aggressively lobby against such taxes.  Their tactics remains a major barrier to the introduction of, and increases in taxes. Government tenacity and commitment to protect people’s health is needed to counter powerful vested interests long opposed to taxation reform.

Another factor is that the COVID-19 pandemic also showed that people who smoke, or are obese or have a diagnosed chronic diseases get sicker and are more likely to die from infectious diseases.


Tobacco use was the leading risk factor for both males and females and contributed the most to fatal burden, with almost 20,500 attributable deaths (13% of all deaths) in 2018. The estimated social cost for tobacco use has been estimated at $136.9 billion.

Evidence shows that significantly increasing tobacco excise taxes and prices is the single most effective and cost-effective measure for reducing tobacco use. Higher tobacco prices also reduce smoking initiation among young people and so help stop them from first becoming addicted.

As part of the PHAA federal election campaign, we are strongly advocating for the equalisation of excise and customs duty of ‘roll your own’ tobacco products to equalise the tax applied to this form of tobacco with “factory made cigarettes” (FMCs).  In addition, a 12.5% increase in tobacco excise, would further increase FMCs cost, and so further motivation for smokers to quit.  If both revenue measures took effect from July 1 2022, we estimate that the three-year increase in net revenue from a 12.5% increase in tax, plus ‘roll your own’ harmonisation is estimated to equal $2.13 billion if implemented in 2022-23.


Alcohol is responsible for a substantial burden of death, disease and injury in Australia affecting not only drinkers themselves but also children, families and the broader community. The estimated social costs of alcohol misuse in Australia has been estimated to be $14.4 billion. The highest costs are associated with productivity losses (42.1%), traffic crashes (25.5%) and cost to the criminal justice system (20.6%).

Alcohol is responsible for 5.1% of the burden of disease in Australia and plays a role in more than 200 different chronic health problems including, cancers, diabetes, nutrition-related conditions, cirrhosis, and being overweight and obesity. The much touted “protective effect” against cardiovascular disease for alcohol consumption, if real, is only at very low levels of consumption.  There is evidence that mid to high levels of drinking substantially increases cardiovascular diseases.

Australia’s current approach to alcohol taxation is flawed and does not adequately recognise the extent of harms that result from alcohol consumption. Alcohol is more affordable than it has been in the past three decades. There is strong evidence to demonstrate that the lower the price of alcohol, the higher the levels of consumption, and therefore higher levels of alcohol related harm.

An increase in taxes on alcoholic beverages is a proven measure to reduce alcohol use and provide the government with revenue to offset the economic costs of alcohol use. Of all alcohol policy measures, the evidence is strongest that alcohol prices have an impact on alcohol consumption and alcohol-related harm.

The Australian Government’s comprehensive review of Australia’s tax system (the Henry Review) identified alcohol taxation as an appropriate measure for improving social outcomes because of the high costs imposed by excessive alcohol consumption.

Volumetric taxation is a tax levied on the alcohol content per volume of the product, rather than on other considerations such as the cost of the manufacture of the product, or the influence of the wine, beer or distilled spirits lobby’s capacity to influence government policy.

Taxing wine and cider the same as beer and lifting the rate by 5¢ to 6¢ for a glass of beer would raise $2.9 billion annually.

Reform of the alcohol tax system will save in excess of $2.7 billion annually and reduce consumption by more than 9.4 per cent.

As part of the PHAA federal election campaign, we are strongly advocating for the implementation of volumetric tax across all alcohol products.

Sugar-sweetened beverages

About 14 million Australians are overweight or obese—that’s two in every three adults, and one in four children. Over-consumption of sugar is a major contributor to obesity. Over one third of Australian adults and almost half of children consume sugary beverages at least once a week. Adolescents and young adults are the highest consumers of sugary beverages. These can be defined as any non-alcoholic beverage containing added sugar. These include sugar-sweetened soft drinks, flavoured mineral waters, fortified waters, energy and electrolyte drinks, fruit and vegetable drinks and cordials. Milk-based products, 100% fruit and/or vegetable juice or non-sugar sweetened beverages (i.e., artificial, non-nutritive or intensely sweetened) are often considered exempt.

Sugary beverages have been flagged for a health levy because:

  1. They are a contained product category and provide minimal or no nutritional benefit.
  2. Consumption has been associated with excess weight gain, dental decay leading to dental caries and other chronic diseases – all of which are high in prevalence in Australia.
  3. Authoritative health organisations recommend limiting sugary beverage consumption.
  4. Consumption of sugary beverages is high in Australia, particularly among adolescents, young adults, Aboriginal and Torres Strait Islander people and low income groups
  5. The evidence demonstrating positive fiscal and health impacts of taxing sugary beverages is growing.

The objectives of a health levy on sugary beverages include:

  1. To increase the price of sugary beverages and reduce the purchase and consumption for consequent population health benefits.
  2. To provide an incentive for manufacturers to reformulate to lower the added sugar content of their products, improving the food supply for all (if the sugary beverages levy is designed to be directly tied to the amount of ‘free’ or added sugar contained in the beverage).
  3. To generate revenue to reinvest back into population nutrition and health.
  4. To increase consumer awareness of the need to reduce consumption of added sugar in their diet and that regular consumption of sugary beverages is not part of a healthy diet.

Young people, Aboriginal and Torres Strait Islander people, and those on low incomes are most at risk of excess weight gain and chronic disease. These population sub-groups will be the most responsive to price changes, and consequently the most likely to receive the greatest health gains. Further benefits may be realised if the revenue is reinvested into nutrition and health prevention policies that benefit these population sub-groups.

Revenue should be earmarked for public health initiatives that aim to improve public health nutrition and populations health, particularly for socioeconomically disadvantaged population sub-groups.

There is strong support for a levy from the Australian public. Research into the attitudes of young Australians aged 18-30 found that 74% of participants supported a tax on sugary beverages if the revenue was used to subsidise healthy foods, with the most Australians supporting a health levy on sugary beverages.

As part of the PHAA federal election campaign, we are strongly advocating for the implementation of a minimum 20% health levy on sugar-sweetened beverages.

The Australian Medical Association (AMA) has estimated that if no action is taken to stem the obesity crisis, by 2025 taxpayers will have footed a further $29.5 billion (over four years) for the direct healthcare costs of obesity.  The AMA predict that the rise in annual government revenue from taxes on sugary beverages could be between $749 million to $814 million.

As COVID-19 continues to compromise health and disrupt communities and economies, and challenge governments PHAA is offering effective solutions which will drive economic recovery and protect the health of all Australians.

The total combined revenue to be captured by these measures over a three-year term of the next federal government is estimated to be:  $AUD 13.02 billion

But what is the strongest argument in favour of increasing taxes on unhealthy products? To save millions of lives.

Image: Playing cards (Thorsten Frenzel/Pixabay), fast food (Marco Verch/Flickr), alcohol bottles (Yair Tsipory/Wikipedia).

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