Tax Revenue Estimates:

Data Requirements and Methods

Lisa M. Powell, PhD
Distinguished Professor and Director
Health Policy and Administration
School of Public Health
University of Illinois at Chicago

Obesity and Fiscal Policy Training Workshop:

Tax Policy Design and Health Impact in Asia
World Health Organization
Asian Development Bank Institute
Asian Development Bank
July 13-15, 2018
Manila, Philippines

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute
(ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included
in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
 Outline of Presentation

• Data Requirements and Methods for Estimating SSB Tax

Revenue
 Data for determining the volume (or value) of the tax base
 Parameter estimates needed
 Data on volume and SSB prices
 Estimation of revenue
 Context of Tax Revenue

 Aim 1- Price pass-through and marketing/promotions

 Aim 2- Consumption and sales of taxed and non-taxed products
 Aim 3- Cross-border shopping
 Aim 4- Implementation
 Aim 5- Employment (not shown)
 What is included in the tax base?

• The tax legislation will determine which products fall into the
tax base:
 SSBs typically include: Soda, energy drinks, sports/isotonic drinks, fruit
drinks, sweetened teas/coffees, sweetened water
 Legislation may vary in applying the tax to syrups and powders
 Legislation may exempt SSBs with low calories
 Legislation may apply the tax to artificially-sweetened beverages (ASBs)
The type of excise tax levied determines data inputs

• The type of excise tax levied has implications for whether you
need to use the volume (Q) or value (P*Q) of the tax base to
determine revenue.

 A specific excise tax is applied per unit; i.e., 1¢ per ounce

o Requires estimates of volume of SSBs

 An ad valorem excise tax is applied as a percentage of the sale price;

i.e., 20%
o Requires estimates of $ sales of SSBs
 Beverage data sources

• Import data

• Domestic production data

• Industry data

• Regional variation

• Details required on beverage types and brands for

classification

• Details required on beverage package volume

• Sources of sales: food stores and restaurants

Sources of Data on SSB Prices

• Stores audits

• Scanner data

• Details required on beverage types, brands and size

• Applying weights to accounts for:

• Source: store versus restaurant
• Package size
• Beverage type
Example of Store Audit Form
SSB Price Estimates by Beverage Category

Source: Powell et al., BTG Research Brief, 2014

Price Data Needed to Determine Percentage Change in Prices
from a Specific Excise Tax

• Recall that the effective tax rate varies based on per unit (MVR/L)
versus ad valorem (% of price)
Table 1: Sweetened Beverage Prices and Examples of Alternative Specific Excise Tax
Amounts (per L)

Soft Drinks (water based

Energy Drinks
flavoured beverages)

Average‡ price (without GST) per L 29.2 MVR 55.7 MVR

Example 1: Apply a specific excise tax equal to a rate of 20%: 5.8

MVR/L for soft drinks; 11.1 MVR/L for energy drinks 5.8 MVR 11.1 MVR
20% tax rate 20.00% 20.00%

Example 2: Apply a specific excise tax equal to the U.S. “penny per
ounce”: 5.2 MVR/L 5.2 MVR 5.2 MVR

Tax rate (%) implied by the specific excise tax 17.82% 9.35%
Notes: MVR=Maldivian Rufiyaa. L=liter. ‡ Average prices for soft drinks are proxied by soda prices which make up 64% of soft drink
imports; the average price for energy drinks was computed as a weighted average based on import shares by brand for XL (54%)
Red Bull (20%) and other energy drink (26%) prices.

Source: WHO, Report on Fiscal Policies to Reduce Consumption of Sugar-sweetened Beverages and other
Regulatory Measures to Promote Healthy Diets in the Republic of Maldives, 2017
Parameter Estimates Needed: Price Elasticity of Demand

• Once you have an estimate of your tax base and you know
the prices of the products in the base and, therefore, how
much the tax raises the prices -- you will then need to be
able to estimate the extent to which that base will change
once the tax is implemented.
• The Price Elasticity of Demand will allow you to estimate
the new base from which you will derive the tax revenue.
 ED = %ΔQ/%ΔP
Evidence: Impact of SSB Prices / Taxes on the Demand for SSBs

Mean Estimates of Price Elasticity of Demand for SSBs

U.S. Studies from 2007-2012

a Overall weighted mean (based on SSB consumption shares) from the estimates from the aggregated

SSB category and estimates from the disaggregated categories within the beverage demand system.

Source: Powell et al., Obesity Reviews, 2013

Hypothetical Example of Revenue Calculation for SSB Tax,
Philippines

SSB Excise tax of ₱ 10 per liter

Pre-tax sales volume (L) 3,650,000,000
Pre-tax price per L ₱ 55
Tax per L ₱ 10
Tax rate 18.2%
% change in sales -21.8%
Reduction in sales (L) (795,700,000)
Post-tax sales volume (L) 2,854,300,000
Tax Revenue ₱ 28,543,000,000

Assumptions: Initial SSB sales volume is 3.650 billion L (~100ml per person per day); ED =-1.2.

 Need to complete this exercise separately for each

category of SSB and then aggregate total revenue.
Rudd Center SSB Tax Calculator
Rudd Center SSB Tax Calculator: Example for Illinois, USA
 Next Steps: Earmarking of Tax Revenue

• A portion of the tax revenue may be earmarked for specific

government programs.
• Earmarking can be important to help garner public support.
• Earmarking for nutrition and physical activity-related programs will
complement the intended health impact of the tax.
• Earmarking toward low-income and minority populations can help
to address health disparities
 Thank you!

Lisa M. Powell, PhD

Distinguished Professor and Director
Health Policy and Administration
Director, Illinois Prevention Research Center
School of Public Health
University of Illinois at Chicago

powelll@uic.edu