Adjunct Professor Terry Slevin – PHAA CEO
Government revenue, primarily gathered through taxes, is and always has been, a fundamentally political issue. Governments need to charge tax to get the money to provide public services, but voters hate paying tax. And in an election year, politicians talk about tax at their peril, unless they are talking about cutting taxes.
The most recent example is the alcohol industry positioning a “beer tax cut” as being fair, good for the economy and perhaps most importantly popular in an election year, is clever politics.
But it is undoubtedly bad public policy.
The PHAA budget submission argues a policy position that has been supported by many reviews of alcohol tax policy as being fair, logical and benefiting revenue and public health. More in the detail of that later.
The 2022-23 Federal Budget, due on 29 March, is a chance to learn from the experiences in recent weeks and months that saw the Omicron variant demonstrating how the economy and public health are interconnected.
PHAA’s pre-Budget submission, The Public Health Crisis Budget, outlines recommendations that would both improve the health of all Australians, and at the same time restore public confidence and bolster Commonwealth revenue to help repair the government’s finances.
Among the PHAA’s recommendations are:
- Begin enacting the recently announced National Preventive Health Strategy, in particular that 5% in aggregate of all government health expenditure go toward to preventive health investments by 2030 to tackle chronic diseases
- Urgently address the need for an expanded public health workforce for Australia, taking into account the challenges of education, training, permanent resourcing, and retention
- Establish an Australian Centre for Disease Control and Prevention
- Embrace levies relating to alcohol, tobacco, and sugar-sweetened beverages, which would simultaneously achieve public health goals while generating revenue to offset other public health investments.
The human toll of chronic diseases in Australia includes cardiovascular diseases, cancer, diabetes and chronic respiratory diseases – all of which are the leading causes of death and disability in Australia.[i] Furthermore, they carry a huge cost that extends beyond health to undermine quality of life, education, workforce productivity, and economic prosperity.
As one part of a response to these health challenges, PHAA recommends that the Government consider the introduction and expansion of health levies (as excise taxes and pricing policies on harmful products which are detrimental to health) that both improve public health, and also generate revenue to help fund investments in public health programs.
The multiple aims of health levies include: to raise awareness about unhealthy products, to reduce the consumption of unhealthy products, to reduce the associated negative health burdens and to create new revenue streams for public health investment. There is clear evidence that health levies are effective and efficient in reducing consumption of the relevant products.
Health levies on products that have a negative public health impact, such as tobacco, alcohol and sugar-sweetened beverages have multiple policy merits.[ii] Health taxes are a high-return investment which save lives and prevent disease, while advancing health equity, averting healthcare expenditure, increase workforce participation, and boost revenue for the general budget.
The combined revenue captured by the measures proposed below over the 4-year Budget period 2022-2026 is estimated to be around $4.2 and $4.6 billion per annum, totalling over $17.4 billion over 4 years.
Tobacco use was the leading health risk factor for both males and females and contributed the most to fatalities, with almost 20,500 attributable deaths (13% of all deaths) in 2018.[iii] The social cost for tobacco use has been estimated at $136.9 billion.[iv]
Evidence shows that significantly increasing tobacco excise taxes and prices is the single most effective and cost-effective measure for reducing tobacco use.[v] Higher tobacco prices also reduce smoking initiation among young people and so help stop them from first becoming addicted. The tobacco industry has for decades claimed that higher excise taxes leads to lower government revenue and higher use of illicit or smuggled cigarettes. This does not hold up to scrutiny, as the World Health Organization[vi] and others have consistently proven.
PHAA recommends that the Government consider the equalisation of excise and customs duties on ‘roll your own’ tobacco products to equalise the tax applied to this form of tobacco with ordinary manufactured cigarettes. Cancer Council Australia estimates that this harmonisation would provide increased revenue of approximately $160m in 2022-23, increasing to $440m by 2025-26.
In addition, PHAA recommends a 12.5% increase in tobacco excise, with the strong proviso that such an increase should be built on top of the harmonisation reform – not done in isolation – and that the proceeds of such an increase should be dedicated to investments in tobacco harm reduction measures
These proposed levy reforms are estimated to raise around $2.4 billion over 4 years.
Alcohol is responsible for a substantial burden of death, disease and injury in Australia affecting not only drinkers but also children, families and the broader community. The social costs of alcohol misuse in Australia has been estimated to be $14.4 billion.[vii] The highest costs are associated with productivity losses (42.1%), traffic crashes (25.5%) and the criminal justice system (20.6%).[viii]
Alcohol is responsible for 4.5% 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.[ix], [x], [xi] There is evidence that mid to high levels of drinking substantially increases cardiovascular diseases.[xii]
Harm from alcohol is preventable, and reducing the amount of alcohol consumed will reduce health and social harms in the Australian community. The costs of alcohol-related harms are significant and far exceed government revenue from alcohol taxation.[xiii]
However, Australia’s current approach to alcohol taxation is flawed, and does not adequately recognise the extent of harms that result from alcohol consumption.[xiv] Alcohol is currently more affordable than it has been in the past three decades. There is strong evidence to demonstrate that the lower the real price of alcohol, the higher the levels of consumption, and therefore higher levels of alcohol-related harm.[xv]
An increase in excise on alcoholic beverages is a proven measure to reduce alcohol use, while also providing the Government with revenue to offset the economic costs of alcohol use.[xvi] The evidence is strong that alcohol price signalling through taxation is the policy response with the largest impact on alcohol consumption and consequently on alcohol-related harm.
The volumetric alcohol tax equalisation proposal is estimated to raise over $12 billion over 4 years.
So now is NOT the time to unilaterally reduce tax on beer, or any alcoholic beverage, outside the framework of a clearly stated tax principle, which is in essence, the higher the alcohol content, regardless of beverage, the higher the tax.
PHAA also recommends that the Government consider a minimum 20% health levy on sugar-sweetened beverages.
One of Australia’s most serious health problems is that around 14 million Australians are overweight or obese. 67% of Australian adults and 25% of children are overweight, while 31% of adults and 8% of children are obese. [xvii], [xviii] The prevalence of obesity in Australia is expected to continue to increase, such that 33% of the projected adult population will be obese by 2025.[xix] Obesity is a major risk factor for chronic and preventable conditions including type 2 diabetes, heart disease, hypertension, stroke, gall bladder disease, osteoarthritis, sleep apnoea and respiratory problems, mental health disorders and some cancers.
The costs of obesity are high. People living with obesity have medical costs that are approximately 30% greater than ‘healthy weight’ people.[xx] In respect of public costs, the Australian Medical Association (AMA) has estimated that if no action is taken to stem the obesity crisis, by 2025 the government budgets will bear a further $29.5 billion (over four years) in direct costs of healthcare for people with obesity.[xxi]
While there are multiple causes of obesity, over-consumption of sugar is a major contributor. Over one-third of Australian adults and almost half of children consume sugar-sweetened beverages at least once a week. Adolescents and young adults are the highest consumers of sugar-sweetened beverages.
The AMA’s 2021 sugar-sweetened beverage health levy proposal – which PHAA supports, is estimated to raise around $2.8 billion over 4 years.
The PHAA estimates that revenue measures outlined ere could collectively generate an additional $17 billion over the forward estimates.
By comparison, our Budget recommendations for new expenditure initiatives on public health programs, investing in a healthier population into the future, total less than less than $1.5 billion.
The Government needs to act seriously on building up Australia’s overall health. We need to become a healthier population, not just to fend off the pressures of the pandemic, but for everyone’s good.
Never again should there be a failure to understand that public health policy IS economic policy.
The Budget due on 29 March is the last big chance to do so in this term of Parliament.
See other Budget-related posts:
- Where will the 2022 Budget take us?
- Population health is economics
- Building a national approach to preventive health investment
- Budget should focus on preventing chronic illness
[i] AIHW, Australian Burden of Disease Study 2018: key findings, August 2021: https://www.aihw.gov.au/getmedia/d2a1886d-c673-44aa-9eb6-857e9696fd83/aihw-bod-30.pdf.aspx?inline=true
[ii] World Health Organisation, Health Taxes: https://www.who.int/health-topics/health-taxes#tab=tab_1
[iii] AIHW, Australian Burden of Disease Study 2018: key findings, https://www.aihw.gov.au/getmedia/d2a1886d-c673-44aa-9eb6-857e9696fd83/aihw-bod-30.pdf.aspx?inline=true
[iv] Identifying the Social Costs of Tobacco Use to Australia in 2015/16, National Drug Research Institute, Curtin University, May 2019, https://ndri.curtin.edu.au/NDRI/media/documents/publications/T273.pdf
[v] WHO report on the global tobacco epidemic 2021: addressing new and emerging products (2021): https://www.who.int/publications/i/item/9789240032095
[vii] The societal costs of alcohol misuse in Australia, Manning, Matthew, Smith, Christine and Mazerolle, Paul, Australian Institute of Criminology, 2013: https://www.aic.gov.au/publications/tandi/tandi454
[ix] AIHW, Australian Burden of Disease Study 2018: Interactive data on risk factor burden: https://www.aihw.gov.au/reports/burden-of-disease/abds-2018-interactive-data-risk-factors/contents/alcohol-use)
[x] World Health Organisation, Global status report on alcohol and health 2018, https://www.who.int/publications/i/item/9789241565639
[xi] FARE / VicHealth / Turning Point report on Alcohol’s Burden of Disease in Australia: https://fare.org.au/wp-content/uploads/Alcohols-burden-of-disease-in-Australia-FINAL.pdf).
[xii] Chengyi Ding, Dara O’Neill, Steven Bell, Emmanuel Stamatakis & Annie Britton, Association of alcohol consumption with morbidity and mortality in patients with cardiovascular disease: original data and meta-analysis of 48,423 men and women, BMC Medicine volume 19, Article number: 167 (2021): https://bmcmedicine.biomedcentral.com/articles/10.1186/s12916-021-02040-2
[xiv] Alcohol and tax — time for real reform, Mike Daube and Julia Stafford, Med J Aust 2016; 204 (6): 218-219. || doi: 10.5694/mja16.00022: https://www.mja.com.au/journal/2016/204/6/alcohol-and-tax-time-real-reform
[xv] Alexander C Wagenaar, Matthew J Salois, Kelli A Komro, Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies, Addiction, 2009 Feb;104(2):179-90, doi: 10.1111/j.1360-0443.2008.02438.x.
[xvii] Australian Bureau of Statistics, 2020, National Health Survey: First results, key findings for health statistics including long-term health conditions; mental wellbeing; and health risk factors: https://www.abs.gov.au/statistics/health/health-conditions-and-risks/national-health-survey-first-results/latest-release
[xviii] Australian Bureau of Statistics (2018). National Health Survey: State and Territory Findings, 2017-18. Retrieved 29/06/2021 from: https://www.abs.gov.au/statistics/health/health-conditions-and-risks/national-health-survey-state-and-territory-findings/latest-release
[xix] PwC Australia (2015). Weighing the cost of obesity: A case for action. pp4-5, 61-63. Retrieved 22/12/2020 from: https://www.pwc.com.au/pdf/weighing-the-cost-of-obesity-final.pdf
[xx] Withrow, D. & Alter, D.A. (2011). The economic burden of obesity worldwide: a systematic review of the direct costs of obesity. Obesity Reviews 12, 131-141. Doi: 10.1111/j.1467789X.2009.00712.
[xxi] Australian Medical Association, 2021, A tax on sugar-sweetened beverages: What the modelling shows: https://www.ama.com.au/articles/tax-sugar-sweetened-beverages-what-modelling-shows