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Prevention: Tax and pricing

Price policies for food and beverages: an overview

Last updated 06-06-2019

Food taxes and subsidies can be effective in promoting dietary change. The pricing measures with the greatest effect on consumption are taxes on sugary drinks and subsidies on fruit and vegetables. The economic rationale for taxes on unhealthy foods is that they create an “external cost” to society arising from increased illness and disability.

Key Evidence


Price policies provide incentives or disincentives for purchasing certain foods


The World Health Organization recommends the use of economic tools to improve diets


The strongest evidence is for taxes on sugary drinks and subsidies on fruit and vegetables

The environments in which people make food choices have a significant influence on what they purchase and eat. Price policies that provide incentives or disincentives for purchasing certain foods are a key policy tool, and have been implemented by an increasing number of countries in recent years.1

The World Health Organization’s Global Action Plan for the Prevention and Control of Non-communicable Diseases 2013-2020 recommends that: “… as appropriate to national context, countries consider the use of economic tools that are justified by evidence, and may include taxes and subsidies, to improve access to healthy dietary choices and create incentives for behaviours associated with improved health outcomes and discourage the consumption of less healthy options”.2

A systematic review of food taxes and subsidies found they can be effective in promoting dietary change. The review considered a range of policy measures including taxes on sugar-sweetened beverages; subsidies on fruit and vegetables; taxes on individual nutrients such as fat, sugar and salt; and taxes on products deemed unhealthy based on nutrient profiling. Based on the available evidence, sugary drink taxes and subsidies on fruit and vegetables were the measures found to be the most effective at changing consumption.3

The World Health Organization (WHO) advises that “there is reasonable and increasing evidence that appropriately designed taxes on sugar-sweetened beverages result in proportional reductions in consumption, especially if they raise the retail price by 20% or more”.4 The WHO concludes that “there is similar strong evidence that subsidies for fresh fruits and vegetables that reduce prices by 10-30% are effective in increasing fruit and vegetable consumption”. According to the WHO, there may be greater effects on net energy intake and weight where subsidies on fruit and vegetables are combined with taxation of target foods and beverages, particularly for low-income consumers.

Other price policies were also considered as part of the systematic review. Taxes on individual nutrients such as fat, sugar and salt had a small impact in reducing consumption of target nutrients. Such taxes were complex, however, because they were likely to apply to a broad range of foods including core foods recommended by dietary guidelines (for example, a saturated fat tax may apply to cheese). Unhealthy food taxes were more straightforward because they targeted foods based on their entire nutrient composition, and were therefore less likely to apply to core foods than taxes on individual nutrients.3

The economic rationale for food taxes is that consumption of unhealthy products creates an “external cost” to society that is not factored into the costs borne by producers or consumers at point of sale. Foods high in sugar, salt and saturated fats can be inexpensive to produce and purchase, but are associated with increased risk of overweight and obesity and related diseases such as type 2 diabetes, cardiovascular disease and some cancers. The increased illness and disability associated with excessive consumption of such products is likely to result in increased health and social care costs to governments, and lost productivity. This is an example of market failure, which justifies government intervention to increase the price of a product through taxation and reduce demand.15


1. World Health Organization Regional Office for Europe. Using price policies to promote healthier diets. Copenhagen, Denmark 2015. Available from:
2. World Health Organization. Global Action Plan for the Prevention and Control of Non-Communicable Diseases 2013-2020, 2013. Available from:
3. Thow AM, Downs S, and Jan S. A systematic review of the effectiveness of food taxes and subsidies to improve diets: Understanding the recent evidence. Nutrition Reviews, 2014; 72(9):551-565.
4. World Health Organization. Fiscal policies for diet and prevention of noncommunicable diseases: technical meeting report. 2016. Available from:
5. Duckett S, Swerissen H, and Wiltshire T. A sugary drinks tax: recovering the community costs of obesity. Melbourne, Australia: Grattan Institute, 2016. Available from: