The consumption impacts of imposing excise tax on sugar-sweetened beverages in Vietnam

In order to establish a demand system with eight F&B items taken into account, comprising sugar, candy, fresh milk, wine, beer, soft drinks, powered coffee and dried t[r]

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

LUONG NGOC MY LINH

THE CONSUMPTION IMPACTS OF IMPOSING EXCISE TAX ON SUGAR-SWEETENED BEVERAGES IN VIETNAM

MASTER'S THESIS ………

Master of Public Policy

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

LUONG NGOC MY LINH

THE CONSUMPTION IMPACTS OF IMPOSING EXCISE TAX ON SUGAR-SWEETENED BEVERAGES IN VIETNAM

MAJOR: MASTER OF PUBLIC POLICY

CODE: PILOT

RESEARCH SUPERVISOR:

Associate Prof Kaida Naoko

Dr Vu Hoang Linh

i

ACKNOWLEDGEMENT

Two years in Vietnam Japan University has come and gone It is my pleasure to become a part of second intake students of this university, where I had a chance to meet many interesting and unique friends as well as many enthusiastic and excellent professors Thanks to Vietnam Japan University, I was able to experience a totally different academic environment from other school, which is worth to spend my time and challenge myself

First, I would like to express my sincere gratitude to my supervisors, Assoc.Prof Kaida Naoko from University of Tsukuba and Dr Vu Hoang Linh from Vietnam Japan University for their enthusiasms, patience and support from the beginning to finishing of my master thesis With their numerous years of experiences and profound knowledge, both supervisors have always given me helpful advices whenever I crashed into a dead end

My honest appreciation goes to JICA, VNU, VJU, University of Tsukuba for giving me great opportunity to study in VJU and experience three-month internship in Japan I also would like to say thanks to all staff in VJU, especially in Program of Master of Public Policy and to the staff in Office of Global Initiatives in University of Tsukuba for their timely assistance and making my study time memorable

Besides this, I want to express my thankfulness to all second intake students, especially to become a part of my student life Hope that everyone will be successful and be happy in the future

ii

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

LIST OF TABLES iv

LIST OF FIGURES v

LIST OF ABBREVIATIONS vi

CHAPTER 1: INTRODUCTION

1.1 Research background

1.2 Research Objective and Research Question

CHAPTER 2: LITERATURE REVIEW

2.1 An overview of sugar-sweetened beverage

2.2 Taxing sugar-sweetened beverages

2.3 Discussion over excise tax on SSBs

2.4 Consumption Impacts of Excise tax around the world 10

2.5 Previous Studies about Sugar Sweetened Beverages in Vietnam 15

2.6 Econometric model to estimate demand function 17

2.6.1 The Stone’s system 18

2.6.2 The Rotterdam models 19

2.6.3 Working-Lesser model 19

2.6.4 The Almost Ideal Demand System (AIDS) 20

CHAPTER 3: METHOD AND METHODOLOGY 23

3.1 Paradigm 23

3.2 Data Collection 25

3.2.1 An introduction of Vietnam Household Living Standard Survey 2016 25 3.2.2 Data Processing 27

3.3 Data Analysis 30

3.3.1 Overview of SSB consumption and SSB consumer 30

3.3.2 Expenditure, compensated and uncompensated elasticity 30

iii

3.3.4 Welfare effect 32

CHAPTER 4: RESULTS 34

4.1 Sugar-sweetened beverages consumption in Vietnam 34

4.2 AIDS results 35

4.3 The impacts of household characteristics on SSB consumption 38

4.3.1 Urban and rural area 38

4.3.2 Majority and minority 39

4.3.3 The number of children 40

4.3.4 The expenditure quintile 42

4.3.5 Six regions in Vietnam 43

4.3.6 Regular and holiday consumption 44

4.4 Welfare effects 46

4.5 Discussion 48

CHAPTER 5: CONCLUSION 52

5.1 Policy implication 52

5.1.1 Imposing tax on SSB in combination with encouraging a healthy lifestyle 52 5.1.2 Learning from international experiences and pay attention to some specific groups 54

5.2 Further Study 54

5.3 Limitations 55

REFERENCES 56 ANNEX 1: LIST OF COUNTRIES THAT ARE APPLYING SPECIFIC TAX ON SUGAR-SWEETENED BEVERAGE

iv

LIST OF TABLES

v

LIST OF FIGURES

Figure 1.1: Government budget and public debt in Vietnam 2011 – 2016

Figure 2.1 Health impacts of obesity

Figure 2.2 Pathway for the effect of fiscal policy intervention

Figure 2.3 The 5-tier health impact pyramid

Figure 2.4: Map of cities and countries that are implementing taxing sugary drinks 11

Figure 4.1 The price distribution of SSB consumed by households in VHLSS 2016 34

Figure 4.2 SSB consumption in Vietnam 2008 – 2016 through VHLSS 35

Figure 4.3 SSB’s expenditure, compensated and uncompensated elasticity be separated by urban and rural area 39

Figure 4.4 SSB’s expenditure, uncompensated and compensated elasticity separated by major or minor ethnicity 40

Figure 4.5 The SSB’s expenditure, uncompensated and compensated elasticity be separated by the number of children in the household 41

Figure 4.6 The SSB’s expenditure, uncompensated and compensated elasticity be separated by the quintile of household 42

Figure 4.7 The SSB’s expenditure, uncompensated and compensated elasticity be separated by six regions in Vietnam 43

Figure 4.8 The SSB’s expenditure, uncompensated and compensated elasticity be separated by time of consuming 45

vi

LIST OF ABBREVIATIONS

BMI Body Mass Index CV Compensating variation EV Equivalent variation FAFH Food Away from Home GSO General Statistics Office HFCS High-fructose corn syrup

IEH Income and expenditure household IH Income household

MOF Ministry of Finance

NCD Non-communication disease OLS Ordinary least squares

O&O Overweight and obesity PHPT Public health product tax SSB Sugar-sweetened beverage

AIDS The Almost Ideal Demand System

1

CHAPTER 1: INTRODUCTION

1.1 Research background

2

addition to that, Vietnam Health Scheme has set the target for the percentage of adult who suffers from O&O under 12% until 2025 and under 10% until 2030 (Vietnam Prime Minister, 2019), which means that Vietnamese authority has a lot of things to to deal with this situation The rising trend was also observed among children and adolescents, with the prevalence of O&O among both genders increased from 2.6% in 2002 to 9.7% in 2016 (The Department of Preventive Medicine, 2017) In big cities such as Hanoi and Ho Chi Minh city, the ratio of children and adolescents who are suffering from O&O was 43% in 2009, increased from 12% in 1996 In 2014 – 2015, this ratio in the inner area of Ho Chi Minh city was 50% and a recent survey in the inner area of Hanoi showed that it was up to 40.7% (Hanoi Health Department, 2017) Although the average BMI of Vietnamese was still far less than O&O threshold, there are existing a concern that Vietnam may reach this ceiling soon

3

Figure 1.1: Government budget and public debt in Vietnam 2011 – 2016 Data for

the Ministry of Finance (2012, 2013a, 2013b, 2013c, 2014a, 2014b, 2015, 2016a, 2016b, 2017a, 2017b)

1.2 Research Objective and Research Question

The objective of this paper is to estimate the consumption impacts of imposing SSBs’ excise tax in Vietnam It will focus on the main research question “How does excise tax on SSB impact on Vietnamese consumers?” and below sub-questions:

▪ To what extent excise tax on SSBs influence on consumers of this kind of product?

▪ If then this tax policy is implemented, what should Vietnamese government pay attention to, from perspective of consumption?

25.965 22.644 23.112

22.289 23.778 24.46

28.334 30.149 30.359 28.035 28.074 30.206

-2.369

-7.505 -7.247 -5.746 -4.296 -5.746

54.9

50.8 54.5

58 61 63.6

-20 -10 10 20 30 40 50 60 70

2011 2012 2013 2014 2015 2016

Government Revenue (%GDP) Government Expenditure (%GDP)

4

CHAPTER 2: LITERATURE REVIEW

2.1 An overview of sugar-sweetened beverage

According to World Health Organization (WHO), free sugar, which is usually added to foods and beverages or naturally contained in honey, syrups and fruit juice and its relative products, includes monosaccharides and (C6H12O6) and disaccharides (C12H22O11) It has been proved that higher intake of free sugar provides significant energy to diets without specific nutrients, which may harm to the balance of their intake energy That is one of the reasons for O&O in recent years In addition, free sugar in foods and beverages is also related to dental caries Therefore, the intake of free sugar should be limited to 10% of total energy intake in near future and to less than 5% in further (World Health Organization, 2015)

SSBs include, but are not limited to sport drinks, energy drinks, lemonade or fruit drinks, sweetened iced tea, vitamin water drinks and carbonates drinks, which contain added caloric sweeteners, for example, sucrose, high-fructose corn syrup (HFCS), which is produced from corn syrup (glucose) or fruit-juice concentrates It is said that SSB is one of the highest free sugar containing products In case of Vietnam, the governmental authority has not given any official definition of SSB However, according to WHO, SSB referred to any beverage item containing added sugars, for example sucrose of high fructose corn syrup (Lobstein, 2014) This ingredient will create a sweet flavor to beverages and satisfy consumers’ taste

5

Figure 2.1 Health impacts of obesity Reprinted from Health impacts of obesity by

Djalalinia, Qorbani, Peykari, & Kelishadi (2015)

2.2 Taxing sugar-sweetened beverages

There are two main kinds of policy tools that government can utilize to improve diet, they are taxation and subsidies By taxing on unhealthy food and subsiding for healthy food, consumer will be encouraged to gradually change their consumed baskets to healthier products Then, it is hoped that this transformation can make significant effects on food industry and society The mechanism of how tax and subsidy on food and beverage effect on consumption was expressed by figure 2.2

Physical health

•Cancers

•Type diabetes •Hypertension •Stroke •CVD •Asthma

•Musculoskeletal problems •Pulmonary embolism •Disability

•Premature death

Mental health

•Low self-esteem •Mood disorder •Motivational disorder •Eating problems •Impaired body image

•Interpersonal communication •Sexual health

•Quality of life

Social health

•Stigma

•Discrimination •Ridicule •Social bias •Rejection •Humiliation

Spiritual health

6

Figure 2.2 Pathway for the effect of fiscal policy intervention Reprinted from Fiscal Policies for Diet and Prevention of Noncommunicable Diseases: Technical Meeting Report by World Health Organization (2016)

In relation to SSBs, many countries are applying tax on this kind of products There are two types of tax: ad-valorem and specific tax Many countries are imposing an ad-valorem tax on SSB, which means that the tax rate is calculated as a percentage of product value As a result, the price of SSB will be relatively higher than other products Whereas, a specific tax is fixed at a constant by unit For example, in Mexico, tax on SSB is 10 Mexico dollars by unit In general, both kind of taxes aim to increase relative price of SSBs in expectation to decrease their consumed volume (World Health Organization, 2018)

Increased purchase and consumption od healthy foods

Decreased purchase and consumption of less healthy food

Financial implications for manufactures and producers – incentive for

decreased production and reformulation Decreased

diet-related risk factors for NCDs

Financial implications for manufactures and producers – incentive for

increased production

Decreased NCD risk

Tax and/or subsidy – incentives for substitution with healthier foods and beverages

Revenue generation: potential healthcare/ health

7

8

second tier because it leads to an increase in price and make number of consumers decrease, which means that SSB is not the default choice of some people

Figure 2.3 The 5-tier health impact pyramid Reprinted from A Framework for Public Health Action: The Health Impact Pyramid by Frieden (2010)

In case of Vietnam, SSBs are considered to be imposed excise tax (or special consuming tax), which is defined as a tax that is applied on goods or services that (a) are not encouraged because of their bad effects on health; (b) are normally consumed by high-income consumers; and (c) are unnecessary services (Vietnamese Assembly, 2008) According to proposal by Ministry of Finance (MOF), an ad-valorem tax at 10 or 20% should be applied on SSBs because of their bad effects on health On the view of MOF, they prefer the first plan (The Ministry of Finance, 2017c)

2.3 Discussion over excise tax on SSBs

Despite of positive policy objectives, this tax policy has raised fierce controversy and dialogue not only among researchers, policy makers but also community around the world Both sides, approval and opposition, have their own opinions to protect their arguments against the another and Barry, Niederdeppe, & Gollust (2013) In the research in 2017, the author based on the opposing arguments to SSB excise tax given by Autralian Beverages Council, which is a lobby group for sugary beverage

Counseling and education Clinical intervention

Long-lasting perspective Intervention Changing the context to encourage

healthy decision Socio-economic factors

Increasing p

opulati

on i

m

p

act

Increasing i

ndividu

al e

ff

9

enterprises, to counter This organization tried to keep the tax away from policy table, so the author of the research had to establish the counterpoints for the opposing arguments, depended on the actual SSB consumption situation in Australia Another public opinion survey conducted by Barry, Niederdeppe, & Gollust showed that American citizens tend to agree with pro-tax than anti-tax arguments because they believed that the tax would not affect to the consumption of unhealthy products (60%), the tax was just a way to fill in the government budget (58%) The majority of them also thought that it was unacceptable way for government to intervene into their lives (53.8%), would be opposed by most of American (53%) and had bad effects on the poor (51%) However, some of them said that the tax contributed largest to O&O (49%) and helped to raise budget for prevention this NCD (41%) due to the severence in the suffering of O&O in this country

Table 2.1 summarizes the key arguments regarding to SSB excise tax around the

10

Table 2.1 Controversy over SSB excise tax

Note: Reprinted from Commentary: Sugar-sweetened beverage tax: The inconvenient truth by Backholer & Martin (2017) and Taxes on Sugar-Sweetened Beverages:

ANTI-TAX ARGUMENTS PRO-TAX ARGUMENTS

• Reason of O&O is not only SSB

• Free sugar consumption is declining • SSB is the largest contributor to O&O • SSB encourages people to consume more

• Quick way to fill in budget holes • Raising government revenue • Unacceptable government intrusion

into personal lives and individual choices

• SSB companies manages consumption decision by marketing strategy

• The tax policy has low public support

• Tax on SSB reduces the bad effects of SSB, which was dissimulated by SSB companies in their marketing strategies

• The tax policy is failed in some countries

• Successful in some countries

• Take time to measure its long-term effects

• Regressive tax and hurt the poor hardest

• Protect the poor by making them to reduce consumed volumes

• The difference of the effects of tax on between the rich and the poor is not much

• Hurt the economy • Equalize the cost between unhealthy and healthy drinks

• SSB industry has supported to reduce O&O by calorie information on packages, removing SSB from school in some countries

• Tax on SSB will result more

• Job lost • Increase the production in non-sugar drink industry

• The reinvestment of revenue will create job in other sectors

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Result from a 2011 National Public Opinion Survey by Barry, Niederdeppe, &

Gollust (2013)

Theoritically, the tax policy had both positive and negative impacts on the socio-economy, which had been foreseen in many researches However, these impacts were different depending on the characteristics of each region or country

2.4 Consumption Impacts of Excise tax around the world

Officially, it was been recorded that tax on soft drinks like SSB had been placed since 1930s in Denmark (The Department of Health, Social Services and Public Safety of Northern Ireland, 2015) Taxing SSB is now becoming popular around the world due to its negative effects on health, especially among countries which are having severe O&O According to a Research Program on global food, there are 41 countries and territories are now issued this regulation, which will be showed by figure 2.4 To be more detailed, the effective date, tax rate and taxed items in each country was showed in Annex

Figure 2.4 Map of cities and countries that are implementing taxing sugary drinks

12

Program, University of North Carolina at Chapel Hill (2018) Retrived from http://globalfoodresearchprogram.web.unc.edu/files/2018/11/SugaryDrink_tax_ma ps_Nov2018_global.pdf

Different countries choose different kinds and level of tax to regulate sugary beverages Among countries that imposed the tax policy, most of them are now continuing the policy, whereas Denmark, one of the first countries intervening into food market has abolished their “fat tax” after fifteen-month of implementation (World Health Organization, 2016) The reason is related to its negative effects on Danish socio-economic In reality, there are many studies researching on the tax effects in above countries It has been proved out that this tax policy has both negative and positive effects The positive impacts of the tax policy include:

Firstly, it has been observed and demonstrated that the tax policy makes the price increase which lead to a decrease in the consumption

13

(Colchero, Popkin, Rivera, & Ng, 2016) Also focusing on price-change effects of the tax in Mexico, aimed to two different group of items, high caloric foods (HCF) and/or sugary drinks, Aguilar et al have found that the price of sugary drinks had increased but more than 100 percent of tax had passed through on consumer prices After years of implementation, they found that the purchased liters of sugary drinks decreased by 6% (Aguilar, Emilio, & Seira, 2016)

In France, in a study of Nutrinet for the General Directorate of Health in 2013, soda consumption has declined (World Health Organization, 2016) In Hungary, the country has already implemented a public health product tax (PHPT) since 2011, prices had increased and partly led to 26-32% of consumers who decrease the intake of subjected items (Martos, et al., 2015) In Berkeley (California), one of the first cities in America issued SSB tax, after four-month of implementation, the consumption of SSB had decreased 21% (Falbe, et al., 2016)

Secondly, there is a shift from SSB to healthier items A study by Martos et al in 2015 has shown that due to public health in Hungary, a lot of consumer choose to substitute their choices by healthier products, for example, mineral water accounted for 63%, fruity and vegetable drinks accounted for 82 – 86%, do-it-yourself sweet drinks accounted for 95%, and green herbs or spices accounted for 84% (Martos, et al., 2015) In Mexico, per capital consumption of bottled water increased (World Health Organization, 2016) In America, after four-month of implementation, the amount of water consumption in Berkeley raised more than compared cities, +63% in comparison with +19% (Falbe, et al., 2016)

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Fourthly, the tax policy force food producers to reformulate their products For instance, the response of consumers to government’ public health scheme had made 40% of food producers reformulate their products, 30% of them remove and 70% of them decrease unflattering ingredients (Martos, et al., 2015)

Fifthly, the tax affected on targeted groups For example, in France, the change in behaviors regarding to the tax had been shown clearly among young people, households that has adolescents ang lower income group (World Health Organization, 2016) In Hungary, overweight and adolescent adult were more likely to change their behavior regarding to targeted products (1.8 – 2.7 times) in a positive way than the others (Martos, et al., 2015) In case of Mexico, the effects on different social status households were varied Aguilar and his colleagues proved that households with higher income were affected most (Aguilar, Emilio, & Seira, 2016) while Colchero et al said that household in low level of socio-economy have been affected largest (Colchero, Popkin, Rivera, & Ng, 2016)

Besides above positive results, there were several unexpected impacts of the tax had been recorded Despite of aiming to reduce the prevalence of O&O, there is nothing change in BMI and even higher after implementing the tax policy This fact has been claimed in Mexico (Aguilar, Emilio, & Seira, 2016) or Finland (Northern Ireland Assembly, 2015)

In Denmark, the authorities even had to abandon their “fat tax policy” due to several disadvantaged consequences The tax policy was said to be ineffective because it was not enough to make consumers change their consumed habits They could easily switch to cheaper products or cross-shopping Added to that, the administrative cost was too high (10% of the tax revenue) and even led to lost 1,300 jobs (Snowdon, 2013)

15

1990 - 2016, including Brazil, Ecuador, India, Mexico, Peru and South Africa, the author group had found out that the own elasticities of SSB in these nations varied from -0.6 to -1.2, which meant that when the price of SSB increased by 1%, the consumed amount would decline by 0.6 to 1.2% Moreover, the research also pointed out that whereas milk is a substitute beverage of SSB, food away from home (FAFH), candy and snack were complementary to SSB (Nakhimovsky, et al., 2016) Another systematic review by Andreyeva, Long and Brownell (2010) collected data from 160 studies related to price elasticities of foods and beverages in America from 1938 to 2010 showed that soft drinks have the elasticity from -0.8 to -1.0 (Andreyeva, Long, & Brownell, 2010) The, several studies had also estimated the own price elasticity in American in different household group Lin et al (2011) estimated that own-price elasticity of low-income group in USA 0.95) were lower than high-income group (-1.29) (Lin, Smith, Lee, & Hall, 2011) In UK, Brigg et al (2013) measured elasticity for low, middle and high-income group by -0.79, -0.80 and -0.85, respectively (Briggs, et al., 2013)

2.5 Previous Studies about Sugar Sweetened Beverages in Vietnam

Due to bad effects of sugary drinks on health, MOF had introduced excise tax on this kind of products since 2014, but this proposal only covered non-alcoholic carbonated sugary drinks Finally, because of strong oppositions of researchers, enterprises and citizens, the implementation of this tax policy had been postponed One of the most important bases for those protest was the research conducted by Nguyen Dinh Chuc (2014) named “Soft drink industry and the economic impact of excise tax on non-alcoholic carbonated soft drink in Vietnam” In this research, Chuc had approached the issue from two directions – elasticity approach and general equilibrium approach From elasticity approach, he tried to estimate price elasticity of SSB through the equation 1:

16

In which, 𝑌 represents the quantity demanded of SSB, 𝑃 represents the price and 𝑋𝑘 represent the control variables Using monthly volumes and values of soft drinks sold in the market of the six largest cities and provinces including Hanoi, Ho Chi Minh city, Da Nang, Can Tho, Hai Phong, Nha Trang from 2007 to 2013, Chuc has established regression result as equation 2:

𝑌𝑆𝑆𝐷 = −2.81𝑃𝑆𝑆𝐷 + 0.0009𝑑𝐺𝐷𝑃 + 3.98𝑃𝐸𝐷 − 0.96𝑃𝐹𝐽 − 1.98𝑃𝑃𝑊

− 0.55𝑃𝑆𝑀 + 1.81𝑃𝑃𝑆𝑆𝐷𝐸𝐷 (2)

In which, 𝑑𝐺𝐷𝑃, 𝑃𝐸𝐷, 𝑃𝐹𝐽, 𝑃𝑃𝑊, 𝑃𝑆𝑀, 𝑃𝑃𝑆𝑆𝐷𝐸𝐷 represents the growth of GDP, price of energy drink, fruit juice, packaged water, soya milk and the interaction between its own price and price of energy drink, respectively The result showed that carbonated soft drinks were sensitive to price with its price elasticity at −2.8, which means that increasing 1% in price of this drink would lead to decrease 2.8% in demanded volume From general equilibrium approach, he estimated the impact of the tax policy on the whole economy According to the results, taxing 10% on SSBs would results in 12.1 million dollars decrease in GDP, 8.46 million dollars increasing in government revenue, whereas the soft industry revenue might loss 40.5 million dollars On economical aspect, it showed that this tax policy had both negative and positive impacts on Vietnamese economy Besides measurable impacts, there might have some other negative consequences, employment effect, income effect, influences on other drinks and unknown administrative cost, for instance (Chuc, 2014)

17 𝑤𝑖 = 𝛼𝑖+ ∑ 𝛾𝑖𝑗ln(𝑝𝑗)

𝑛 𝑗=1

+ 𝛽𝑖ln (𝑥

𝑃) + ∑ 𝛿𝑖𝑘ln 𝐻𝑘 𝑘

+ 𝜋𝑖𝑗𝐼𝑀𝑅 (3)

In which, 𝑤𝑖 represents the proportion of ith product expenditure on the total

expenditure of four drinks; 𝑝𝑗 represents the price of four kinds of drinks, including beverages, milk, coffee and tea; 𝐻𝑘 represents for dummy variables and household variables, including household size, age, education level, gender of household’s head, location and income group; IMR represents Inverse Mill’s Ratio, which relates to the decision of household to participate in the market or not (Phong & Thai, 2017) Based on the outcomes of the model and literature review, they had assessed three out of five characteristics of a good tax policy according to Stiglitz (1986), including economic, simplicity and equality The result showed that the own elasticity of SSB was -2.7718, which means that if the price of SSB increased by 1%, the demanded quantity would decrease by 2.7718% This figure was quite similar to the result provided by Chuc (2014) In conclusion, Phong and Thai said that the tax policy can satisfy only one out of three characteristics, which is economic characteristic Therefore, they suggested that SSB should not be levied excise tax and government should follow revenue tax policy or amending corporate income tax (Phong & Thai, 2017) However, it is hard to conclude whether a tax policy is good or not because the AIDS only focuses on individual market but not the whole economy To assess the possibility of the imposition of excise tax, it is necessary to apply another approach, computable general equilibrium, for example

2.6 Econometric model to estimate demand function

18

work due to complicated technique and strict restrictions, including adding-up, restriction, homogeneity restriction and symmetry restriction Basically, there were two forms of a demand function, Marshallian demand function and Hicksian demand function In Marshallian demand function, a giving quantity (𝑞𝑖) was a function of prices (𝑝) and total expenditure (𝑥) as equation 4, which meant that it reflected the relationship between consumed quantity and its price (Deaton & Muellbauer, 1980b):

𝑞𝑖 = 𝑔𝑖(𝑥, 𝑝) (4)

Whereas, the Hisksian demand function was seemed quantity (𝑞𝑖) as a function of utility (𝑢𝑖) and price (𝑝) In which, utility was a function of prices (𝑝) and total expenditure (𝑥), so Hicksian demand function could be written as equation (Deaton & Muellbauer, Economics and consumer behavior, 1980b):

𝑞𝑖 = ℎ𝑖(𝑢, 𝑝) = ℎ𝑖(𝑢(𝑥, 𝑝), 𝑝) (5) Despite of simple definition, to establish a demand function was a challenge to any researcher due to its restriction as named above Generally, the econometric studies of demand might be a single equation or a system of demand equations The most basic demand function was linear demand function which simply estimated the relationship between quantity and price and other independent variables However, it was obviously that this function was hard to satisfy the adding-up restriction

2.6.1 The Stone’s system

In 1954 Richard Stone firstly introduced his achievement in estimating demand function The function had the form as equation 6:

log 𝑞𝑖 = 𝛼𝑖+ 𝑒𝑖log𝑥

𝑃+ ∑ 𝑒𝑖𝑘 ∗ 𝑛 𝑘=1

log𝑝𝑘

𝑃 (6)

19 log 𝑃 = ∑ 𝑤𝑘

𝑘

log 𝑝𝑘 (7)

It was easily seen that 𝑒𝑖 was the total expenditure elasticity The compensated elasticity of item i in respect to item k was calculated as equation (Stone, 1954):

𝑒𝑖𝑘 = 𝑒𝑖𝑘∗ − 𝑒𝑖𝑤𝑘 (8)

Despite of satisfying some restriction, actual estimation results showed that there existed conflict in the relationship between different food items For example, food item A might be substitution of B, but B was complementary product of A (Deaton & Muellbauer, Economics and consumer behavior, 1980b) Therefore, the most popular application of this system was so-called the Stone index, which was utilized to solve the problem of nonlinearity of inherited systems

2.6.2 The Rotterdam models

The Rotterdam model was developed by Theil (1965) and Barten (1969), which used the similar approach as Stone but rather than using the function of logarithms, this model used differentials as equation (Theil, 1965):

𝑑(log 𝑞𝑖) = 𝑒𝑖(𝑑(log 𝑥) − ∑ 𝑤𝑘 𝑘

𝑑(log 𝑝𝑘)) + ∑ 𝑒𝑖𝑗∗ 𝑗

𝑑(log 𝑝𝑗) (9)

In which, 𝑤𝑘 was the budget share of good k If we multiplied this function to 𝑤𝑖, it would become equation 10:

𝑤𝑖𝑑(log 𝑞𝑖) = 𝑏𝑖𝑑(log 𝑥̅) + ∑ 𝑐𝑖𝑗 𝑗

𝑑(log 𝑝𝑗) (10)

In which,

𝑑 log 𝑥̅ = 𝑑 log 𝑥 − ∑ 𝑤𝑘 𝑘

𝑑(log 𝑝𝑘) = ∑ 𝑤𝑘 𝑘

20 𝑏𝑖 = 𝑤𝑖𝑒𝑖 = 𝑝𝑖𝜕𝑞𝑖

𝜕𝑥 (12)

𝑐𝑖 = 𝑤𝑖𝑒𝑖𝑗∗ =𝑝𝑖𝑝𝑗𝑠𝑖𝑗

𝑥 (13)

Regarding to restrictions, Rotterdam model could satisfy the restrictions under specific conditions In 1969’s research, Barten had tried to test the restrictions Excepting adding-up restriction, he showed that there were conflicts between theory and reality in homogeneity and symmetry restrictions (Barten, 1969)

2.6.3 Working-Lesser model

The original form of Working-Lesser model expressed budget share of a specific item by a linear function of the logarithm of total expenditure and price index of all products that were under consideration (Working, 1943; Leser, 1963) Despite of many different versions, they were all based on and developed from the most basic model, which was written as equation 14

𝑤𝑖 = 𝛼0+ 𝛼𝑖log 𝑥 (14)

However, the most functional form of this model was showed as equation 15 𝑤𝑖 = 𝛼0+ 𝛼𝑖log 𝑥 + ∑ 𝛽𝑖𝑗log 𝑝𝑗

𝑖

+ ∑ 𝛾𝑖𝑘log 𝐻𝑘 𝑖

+ 𝜀𝑖 (15)

21

2.6.4 The Almost Ideal Demand System (AIDS)

It could be said that AIDS was inherited from its predecessors as mentioned above The system was firstly introduced by Deaton and Muellbauer in 1980 (Deaton & Muellbauer, An Almost Ideal Demand System, 1980a) The cost function of AIDS 𝑐(𝑢, 𝑝), which defined the minimum expenditure level to get a fixed utility level at a given price, was as function 16

ln 𝑐(𝑢, 𝑝) = 𝛼0+ ∑ 𝛼𝑘ln 𝑝𝑘 𝑘

+1

2∑ ∑ 𝛾𝑘𝑙 ∗ ln 𝑝

𝑘ln 𝑝𝑙 𝑙

𝑘

+ 𝑢𝛽0∏ 𝑝𝑘𝛽𝑘

𝑘

(16)

Then, if we a logarithmic differentiation of 16 and maximize the utility level of consumer, we can get the theoretical form of AIDS as equation 17, which showed the budget shares as a function of p and x

𝑤𝑖 = 𝛼𝑖 + ∑ 𝛾𝑖𝑗 𝑚 𝑗=1

ln 𝑝𝑗 + 𝛽𝑖ln𝑥

𝑃 (17)

In which 𝑃 referred to a price index which is calculated by equation 18:

ln 𝑃 = 𝛼0+ ∑ 𝛼𝑘ln 𝑝𝑘 𝑘

+1

2∑ ∑ 𝛾𝑘𝑙 ∗ ln 𝑝

𝑘ln 𝑝𝑙 𝑙

𝑘

(18)

The most important advantage of this system was its “flexibility” and its satisfaction of aggregation across consumers The AIDS was said to automatically meet with three restrictions of a demand function (Moschini, 1995; Vu, 2008):

22 ∑ 𝛼𝑖 =

𝑛 𝑖=1

∑ 𝛾𝑖𝑗 = 𝑛

𝑖=1

∑ 𝛽𝑖 = 𝑛

𝑖=1

(19a, b, c)

• Homogeneous restriction (equation 19) – the Hicksian demands are homogeneous to degree zero

∑ 𝛾𝑖𝑗 = 𝑗

(20)

• Slutsky symmetry restriction (equation 20), which refers to the symmetry in the cross-price derivatives of the demands

𝛾𝑖𝑗 = 𝛾𝑗𝑖 =1 2(𝛾𝑖𝑗

∗ + 𝛾

𝑗𝑖∗) (21)

23

CHAPTER 3: METHOD AND METHODOLOGY

This research aimed to estimate the consumption impacts of imposing excise tax on sugar sweetened beverages – which was proposed by Vietnamese MOF but has not been enforced yet due to severe controversy among government authority, scholars as well as citizens The research focuses on answering the questions: How does excise tax imposed on SSBs impact on Vietnamese consumers?

There are several ways to evaluate the impacts of a tax policy, including both qualitative and quantitative methods This research is trying to apply qualitative method in order to measure clearly these impacts and establish accurate policy implication

3.1 Paradigm

Because of the advantages over other models, the AIDS were still applied popularly in many researches and this research was also not a bystander However, it is undeniable that the household characteristic will significantly effects on consumption behaviors and choices Therefore, this research would employ Ray’s method (1983) to give demographics into the system The fundamental concept of Ray was to convert household with different contexts into equivalent units, in term of some reference household, which was called equivalent scale This scale had an important meaning in welfare economics as well as public policy in terms of equity, justice and resource relocation (Ray, 1983) According to Ray’s method, the cost function of a household

h at a given price level p and utility level u was proportional to the cost function of

representative household 𝑐𝑅 by a general equivalence scale 𝑚̅̅̅̅ as function …, in 0 which 𝑐𝑅 shared the same function as function 16

24 𝑤𝑖 = 𝛼𝑖+ ∑ 𝛾𝑖𝑗ln 𝑝𝑗

8 𝑗=1

+ (𝛽𝑖 + 𝜂′𝑧) ln [ 𝑚

𝑚̅0(𝑧)𝑎(𝑝)] + 𝜀𝑖 (23) In which 𝑖 and 𝑗 run from to k corresponding to k items that were taken into account In this research, there were items, including sugar (𝑖 = 𝑗 = 1), candy (𝑖 = 𝑗 = 2), fresh milk (𝑖 = 𝑗 = 3) , wine (𝑖 = 𝑗 = 4) , beer (𝑖 = 𝑗 = 5) , bottle beverages (𝑖 = 𝑗 = 6), powered coffee (𝑖 = 𝑗 = 7) and tea (𝑖 = 𝑗 = 2)

The dependent variable (𝑤𝑖) denoted the proportion of consumed value of item ith

over all covered items The independent variable (𝑝𝑖) denoted the average price of item ith that was consumed by the household And, the equivalent scale 𝑚̅

0(𝑧) was calculated as a function of household characteristics 𝑧𝑥 (function 24) In this research, there were 10 household characteristics that would be mentioned in the next part

𝑚̅0(𝑧) = + ∑ 𝜌𝑥𝑧𝑥 10

(24) And ln[𝑎(𝑝𝑖)] was a trans-log function as mentioned in equation 23:

ln[𝑎(𝑝)] = 𝛼0+ ∑ 𝛼𝑖ln 𝑝𝑖

𝑖=1

+1

2∑ ∑ 𝛾𝑖𝑗ln 𝑝𝑖ln 𝑝𝑗

𝑗=1 𝑖=1

(25)

By estimating above system, this research would be able to measure approximately the compensated price elasticity, uncompensated price elasticity and expenditure elasticity for item ith

25

3.2 Data Collection

This research used the data collected by GSO every two-year, which is called Vietnam Household Living Standard Survey (VHLSS) The main utilized version is the one conducted in 2016 but other years’ surveys were also processed in order to show the trend of SSB consumption in recent years As the method of collection and procession was the same among years, this part only mentioned about VHLSS 2016

3.2.1 An introduction of Vietnam Household Living Standard Survey 2016

VHLSS was a nation-wide survey in Vietnam that was collected every two years by GSO, in order to inquire information about income, expenditure as well as other living conditions of Vietnamese household The most recent survey with available data was conducted in 2016, following Decision 1095/QD-TCTK on Conducting Household Living Standard Survey in 2016 The detail of VHLSS 2016 was summarized in table 3.1

Table 3.1 Information about Vietnam Household Living Standard Survey 2016

Survey Detail information

Survey object - Households and members of households - Communes that had survey households Survey scope Across 63 provinces and cities

Time of survey The VHLSS 2016 was conducted within one month for an area There were four periods of time: March, June, September and December

Survey period Thirty days or twelve months before survey Survey method Interview

26

- Household income: income and income classified by source (from salary; agriculture, forestry and fishery industry; other production and service industry; other)

- Household expenditure: expenditure and expenditure classified by purpose and by type of expenditure (for meal, clothes, accommodation, commute, education, medicine, culture and other)

- Other characteristics of households and members of households: main demographic characteristics (age, gender, ethnic, marital status); educational level; disease status and medical service using; employment; electric, water and sanitary condition; voluntary and aid scheme participation To commune: Collect information that affected to household living standard

- Overall demographic and ethnic condition

- Basic socio-economic infrastructure: system of electric, road, school, medical office, market, post office and water source - Economic situation: agricultural production (land, main

crops, production supporting conditions like irrigation and agricultural extension), non-agriculture jobs

- Other information related to social safety, environment, credit and savings

Note: Reprinted from Decision 1095/QD_TCTK on Conducting Household Living Standard 2016 by General Statistics Office (2015)

27

expenditure information (income and expenditure household – IEH) [General Statistics Office, 2018b] As a requirement of necessary variables, this research would utilize data of 9.399 IEHs The table 3.2 summarized information about the sample of VHLSS 2016

Table 3.2 The sample of VHLSS 2016

Time Number of

Communes

Number of households

Total IH IEH

Total 3.133 46.995 37.596 9.399

In which

March 2016 784 11.760 9.408 2.352 June 2016 783 11.745 9.396 2.349 September 2016 783 11.745 9.396 2.349 December 2016 783 11.745 9.396 2.349

Note: Reprinted from Result of the Vietnam Household Living Standards Survey 2016

by General Statistics Office (2018b)

There are eight food items that were under consideration, including sugar, candy, fresh milk, wine, beer, soft drinks, powered coffee and dry tea This research focused on SSBs, so its main concern was soft drinks, which was defined as all bottled beverages in the market such as carbonated drinks, fruit juice, energy drinks and fresh water, excluding instant tea and coffee Unfortunately, this research could not extract fresh water from other sugary drinks

3.2.2 Data Processing

28

would be given into AIDS in order to estimate the income, compensated and uncompensated price elasticity of SSBs Finally, the research would analyze the dataset and result of AIDS to give some policy implications

In order to estimate AIDS by using VHLSS 2016, eight food items were added into the model, including sugar, candy, fresh milk, wine, beer, bottled beverages, instant coffee and dried tea Regarding to these products, VHLSS 2016 only investigated the consumed amount and the consumed value of each household Except fresh milk, VHLSS asked household representative about how much they consumed in holiday, which was assumed to last for 15 days per year, and how much they consumed regularly in the last 30 days Therefore, for these items, the estimated consumed quantity of item i (𝑞𝑖) and the estimated amount of money spending on item i (𝑣𝑖) for one year were calculated as equation 26 and 27:

𝑞𝑖 = 𝑞𝑣𝑎𝑐𝑎𝑡𝑖𝑜𝑛+ 𝑞30𝑑𝑎𝑦𝑠×360

30 (26)

𝑣𝑖 = 𝑣𝑣𝑎𝑐𝑎𝑡𝑖𝑜𝑛+ 𝑣30𝑑𝑎𝑦𝑠×360

30 (27)

For fresh milk, because it was considered as regular food item, so VHLSS 2016 only asked about how much a household consumed this product in the last 30 days So, the estimated consumed quantity (𝑞𝑖) and the estimated amount of money spending on fresh milk (𝑣𝑖) for one year were calculated as equation 28 and 29:

𝑞𝑖 = 𝑞30𝑑𝑎𝑦𝑠×365

30 (28)

𝑣𝑖 = 𝑣30𝑑𝑎𝑦𝑠×365

30 (29)

For price of each item, VHLSS did not survey the actual price of each food item so in this research, the price of item ith (𝑝

𝑖) will be seemed as the average price (Equation 30) of that item in case of positive amount of consuming

𝑝𝑖 =𝑣𝑖

29

However, because not all household consumed all item in selected basket, so in case of zero consumption, the price of item ith was the median of 𝑝𝑖 by district If the median value of 𝑝𝑖 by district were unable to be calculated, it was replaced by the median value of 𝑝𝑖 by province The reason for using median value for 𝑝𝑖 was because of exceptional high and low average value in the price range, which could be show later (Figure 4.1)

For the household characteristics, there were six household characteristics that were taken into account, including:

- The variable of “urban” was used to separate the living area of household, whether they are living in urban or rural area In case of urban, “urban” equaled to and in the opposite case, “urban” equaled to

- The variable of “majority” was used to distinguish the ethnicity of household If they are Kinh, they will be majority people in the society and these households will have “majority” equal to In the other cases, “majority” equals to

- The variable of “hhsize” measures the number of people in each household - The variable of “exp_quan” were utilized to rank the expenditure quintile of

households from to 5, corresponding to the highest one to lowest one - The variable of “nchild” indicated the number of children in each household - Regarding to six geographical area of Vietnam, there were variables, “reg6_1”

to “reg6_5” The variable of “reg6_1” equaled to if the household was living in Red River Delta and equaled to in other cases The variable of “reg6_2” equaled to if the household was living in Midlands and Northern Mountains area and equaled to in other cases The variable of “reg6_3” equaled to if household was living in North Central and Central Coast and equaled to in other cases The variable of “reg6_4” equaled to if the household was living in Central Highlands and equaled to in other cases The variable of “reg6_5” equaled to if the household was living in South East and equaled to in other cases

30

3.3 Data Analysis

3.3.1 Overview of SSB consumption and SSB consumer

Because VHLSS collected data from selected citizens in nation-wide, utilizing the data in VHLSS 2010 – 2016 could help us to see the trend in consuming a specific product and also SSB in particular

Here was some information that could be extracted from the database:

- Price of SSB: The average price of one liter of SSB, the price range of SSB that consumers spent on, the price level at which majority of consumer consumed - The trend in consuming SSB from 2010 – 2016

- The characteristics of SSB consuming households: household structure, urban or rural area and so on

By analyzing these features, this research aimed to provide an overview over SSB consumption in Vietnam Through this step, we could also predict which factors were affecting to this market and who were affected most by the increasing price created by new tax policy

3.3.2 Expenditure, compensated and uncompensated elasticity

After estimating the AIDS, the elasticities of each item would be calculated by using equation 29, 30 and 31 (Poi, 2012) The first elasticity showed that if the total expenditure of a household increased by 1%, price of good i would increase by 𝜇𝑖% Therefore, the expenditure elasticity for good i was:

𝜇𝑖 = 𝑑 ln 𝑣𝑖 𝑑 ln 𝑚 =

𝑑 ln(𝑚𝑤𝑖)

𝑑 ln 𝑚 = +

𝑤𝑖(𝛽𝑖+ 𝜂

′𝑧) (31)

31

To calculate own-price elasticities and cross-price elasticities, the research utilized both Marshallian and Hichsian price elasticities The Marshallian (uncompensated) price elasticity for good i in respect to price of good j was:

𝜖𝑖𝑗 = 𝑑 ln 𝑣𝑖

𝑑 ln 𝑝𝑗 = −𝛿𝑖𝑗+

𝑤𝑖[𝛾𝑖𝑗 − (𝛽𝑖 + 𝜂

′𝑧)𝑑 ln 𝑎(𝑝) 𝑑 ln 𝑝𝑗 ] = −𝛿𝑖𝑗 +

𝑤𝑖[𝛾𝑖𝑗 − (𝛽𝑖 + 𝜂 ′𝑧)𝛼

𝑗 + ∑ 𝛾𝑖𝑗ln 𝑝𝑗 𝑛

𝑗=1

]

(32)

Where 𝛿𝑖𝑗 is the Kronecker delta (𝛿𝑖𝑗 = for 𝑖 = 𝑗 and 𝛿𝑖𝑗 = for 𝑖 ≠ 𝑗) (Green & Alston, 1990) The uncompensated elasticity showed how demand would change once the price changes by 1% with the assumption of unchanged income It solves the problem of maximize utility of consumer, with subjecting to a specific amount of expenditure level

Approaching from another aspect, the Hicksian demand solved the problem of cost minimization, with subjecting to a specific level of utility The Hicksian (compensated) elasticity was calculated as function … It said that if the price increased by 1%, the demand on that item would change at 𝜖𝑖𝑗𝐶%

𝜖𝑖𝑗𝐶 = 𝜖𝑖𝑗 + 𝜇𝑖𝑤𝑗 (33)

Despite of approaching from different aspects, both approaches were said to be interchangeable (Deaton & Muellbauer, Economics and consumer behavior, 1980b) By estimating this number, we could answer the question of how much consumption demand would change when imposing tax on SSBs This research would use these equations to calculate the elasticity at means value

3.3.3 The differences in elasticity between different household patterns

32

in the household, the quintile of household, the time of consuming SSB – regularly consuming, holiday consuming or both periods of time

The method of estimating was similar to the previous part However, for the purpose of comparison, this research only employed the basic AIDS in this part, which mean that there was no household characteristic be added into the system

3.3.4 Welfare effect

After estimating the elasticities of different household groups, the research would measure the welfare effects of the new tax policy based on the calculated elasticities In reality, almost intervention of government will lead to a change in welfare, but this change is hard to measure The changing in welfare before and after imposing tax could be defined by compensated variation (CV) and equivalent variation (EV) Both terms referred to a money metric and firstly named by Hicks (1942)

CV estimated the changes in welfare when supposing that the initial utility level was fixed but the price was shifted Whereas, EV was assumed that the price changes while the utility level of consumers was equal to the level after changing the price (Hicks, 1942) Theoretically, the function of CV and EV when a single price be changed was calculated by using equation 32 and 33

33

Following Friedman and Levinsohn (2002), Robles and Maximo (2010), Yu (2014), the simplification of CV can be calculated by using the second order of Taylor approximation If then we deflated by 𝑥0, representing the initial consumption value of food item, it can be expressed by the equation 34 (Araar & Verme, 2016):

𝐶𝑉

𝑥0 = 𝑤𝑖∆𝑝𝑖 +

2𝜀𝑖(∆𝑝𝑖)

34

CHAPTER 4: RESULTS

4.1 Sugar-sweetened beverages consumption in Vietnam

Recent years, it is obvious that the living condition of Vietnamese has gradually improved As a result, the demand on necessary and unnecessary items have also increased In the past, SSB could be seemed as a luxury beverage but nowadays, it has become popular among citizens and can be purchased everywhere, from a roadside water stall to a big shopping mall with an affordable price It was calculated from VHLSS 2016 dataset that the mean price of SSB that were consumed by household was 19,606.55 dong per liter And 83.8% of household in VHLSS that consumed SSB in 2016, had consumed this kind of product with the average price between 5,000 dongs to 40,000 dongs per liter The figure 4.1 shows the price distribution of SSB that were consumed by households in VHLSS 2016, which pointed out that the average price allocated most was 20.000 dong per liter

Figure 4.1 The price distribution of SSB consumed by households in VHLSS 2016

A survey that is conducted every two-year like VHLSS is a good way to observe consumption trend of citizens in general because it covers all households nation-wide

0

.0

1

.0

2

.0

3

.0

4

.0

5

D

e

n

si

ty

35

with different social contexts The figure 4.2 shows the changing in consumption habits of households from 2008 to 2016 through VHLSS

Figure 4.2 SSB consumption in Vietnam 2008 – 2016 through VHLSS

As can be seen from the figure 4.2, the percentage of SSB consumer surveyed by VHLSS had increased gradually year by year Until 2016, nearly 70% of the sample said that they had consumed SSB However, looking at the graph, it is easy to realize that most of them consumed this item in special occasions like Tet holiday That number in daily life was quite low, just equaled to nearly half of above occasions Nevertheless, it cannot deny that all figures were increasing

4.2 AIDS results

In order to establish a demand system with eight F&B items taken into account, comprising sugar, candy, fresh milk, wine, beer, soft drinks, powered coffee and dried tea and 10 household characteristics, including living area, ethnicity, household size, quintile of expenditure, the number of children and five dummy variables for regions, and, the research employed STATA to estimate AIDS The system was run for a sample of 9,382 observations, after eliminating some households with missing data

56.22% 58.91%

66.38% 69.76%

53.17% 55.00%

62.86% 66.51%

18.50%

23.80% 28.67%

29.89%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

2 2

Consumed SSB

36

Table 4.1 showed the estimated expenditure, uncompensated, compensated own-price elasticities and cross own-price elasticity for those all above items

Table 4.1 Elasticity results

Full sample (n=9,382)

Expenditure elasticity

Marshallian own-price

elasticity

Hicksian own-price

elasticity

Marshallian cross price elasticity of SSB

with respect to price of good j

Sugar 0.3314 -0.3298 -0.2852 -0.0609

Candy 0.7212 -0.7049 -0.5736 -0.0194

Fresh milk 1.6250 -1.0429 -0.7903 0.0859

Wine 0.9376 -0.8704 -0.7388 0.0381

Beer 1.3425 -1.0688 -0.8892 0.1170

Soft drink 0.9577 -1.2217 -1.1399 -1.2217

Powered coffee 1.2779 -0.7879 -0.7623 0.0218

Dried tea 1.0310 -0.8260 -0.6731 0.0813

The result showed that the expenditure elasticity of all food items here is positive, which means that if total expenditure increases by 1%, the expenditure for all items will follow up, which is quite suitable to consuming theory In particular, the expenditure elasticity of SSB was approximately 0.9577 which means that if the total expenditure of a household increases by 1%, the budget for SSB will increase by 0.9577% This rate is quite high in comparison to a necessary commodity like sugar (0.314), another sugar-containing product – candy (0.7212) and wine (0.9376), but lower than other beverage products like dried tea (1.0310), powered coffee (1.2779), beer (1.3425) and fresh milk (1.6250)

37

elasticities bigger than 1, including fresh milk (1.0429), beer (1.0688) and SSB (1.2217), which means that these products were elastic to price Whereas, other items were inelastic because their absolute values were lower than1 Among eight items, SSB had the highest level of Marshallian own-price elasticity The result pointed out that if the price of SSB increased by 1%, the consuming amount of each household would decrease by more than 1% at 1.2217% Supposing that the new tax policy was implemented with tax rate 10%, the household would cut down their consumed SSB by 12.217% It showed that the new tax policy may be effective in term of declining the level of SSB consuming

38

4.3 The impacts of household characteristics on SSB consumption

The reaction of households to the changing in price will be diverse due to the differences in their characteristics In this part, AIDS will be employed on distinguished group of households for measuring the consequences of new tax policy on each of them There were six groups under consideration, including urban/rural are, major or minor ethnicity, the number of children, the quintile, the region and time of consuming

4.3.1 Urban and rural area

There is a slight difference between the elasticities of SSB consumer in rural and urban area Relating to the percentage of SSB consumer, this ratio in urban area (80.10%) is higher than that in rural area (65.49%), which means that citizens living in urban area are more likely to consume SSB than another one

39

Figure 4.3 SSB’s expenditure, compensated and uncompensated elasticity be

separated by urban and rural area

4.3.2 Majority and minority

The research tried to figure out whether ethnic of a household affects to its SSB choice and the outcome of AIDS said that there is existing the relationship between ethnic and SSB consuming behavior

As can be seen from figure 4.4, it is obvious that the percentage of SSB consumer with major ethnic (72.43%) is higher than minor one (57.64%) Looking at uncompensated elasticity of both groups, the figure shows that the majority will response to new tax policy in a stronger way due to its higher absolute value (1.26 in comparison to 1.11) However, similar to the case of urban and rural are, the income effect in the minority group is more significant than the other one, whereas, the uncompensated elasticity of majority is higher than minority It is because people with minor ethnic is more sensitive to income than the major, because most of them are living in a tougher environment than the another, for example, mountainous area

0.84 1.03

-1.23 -1.3 -1.12 -1.21

80.10%

65.49%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%

-1.5 -1 -0.5 0.5 1.5

Urban Rural

Expenditure elasticity Compensated elasticity

40

Figure 4.4 SSB’s expenditure, uncompensated and compensated elasticity separated

by major or minor ethnicity

4.3.3 The number of children

The highest number of children in a household that VHLSS 2016 recorded was children However, due to the condition of the sample, all households with more than children will be aggregated in a group The research tried to examine whether the number of children in the household is affecting on SSB consuming situation in each family

The resulted show that there may exist the relationship between the number of children in the household and the percentage of SSB consumer in each group The biggest proportion of SSB consumers is the household that has only one child (76.14%) And then, the proportion gradually decrease when the number of children in the household increase The proportion of SSB consumer decrease significantly when the household has the fourth children, just 57.80% in comparison to 71.98% of the household that has three children Then, if the number increases, the percentage of SSB consuming households will decline further, to 52.08% of households To the households that not have children, the percentage of SSB consuming household is

0.95 1.05

-1.18

-1.02

-1.26 -1.11

72.43%

57.64%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

-1.50 -1.00 -0.50 0.00 0.50 1.00 1.50

Majority Minority

Expenditure Elasticity Compensated elasticity

41

62.55%, lower than the one with children but higher than the one with more than children

Figure 4.5 The SSB’s expenditure, uncompensated and compensated elasticity be

separated by the number of children in the household

Looking at the elasticity data, it is easy to realize that if government decided to impose excise tax on SSB, the household with more than children would react strongest to the policy because of the highest uncompensated elasticity (1.38) The household with no children also decreases significantly their consumed SSB amount (1.32) The uncompensated elasticities of other households with to children are quite similar and fluctuated from 1.19 to 1.22 However, if we look at the expenditure elasticity of these households group, it could be noticed that the group with no children is affected most by income effect, which means that if the total expenditure of household increase by 1%, the expenditure for SSB will rise by 1.07% , whereas, the other groups only increase their budget for SSB by lower than 1%

The result has showed a clear connection between two factors, the number of children in the household and the percentage of SSB consuming household The percentage of household spend on SSB will increase once they have their first children It can be explained by the psychology of adults who are promoted to be parents or grandparents

1.07

0.92 0.95 0.85 0.90 0.88

-1.23-1.32 -1.14-1.22 -1.11-1.19 -1.13-1.20 -1.15-1.22 -1.31 -1.38 62.55%

76.14% 75.60%

71.98%

57.80%

52.08%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%

-2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50

0 More than

Expenditure elasticity Compensated elasticity

42

for the first time Added to that, when giving birth to the first child, the budget of family has not been limited possibly Then, maybe because of budget constraint, with higher number of children, households are pushed to reduce the budget for outer beverages like SSB, especially when they have more than children In addition, with higher number of children, households seem to response to the tax policy stronger

4.3.4 The expenditure quintile

Income is always a factor affecting to consuming choices of any household However, income is quite hard to measure exactly, especially for household that earned money form varied sources or for informal labors that have unstable income Therefore, in this research, total expenditure was utilized instead of total income

Figure 4.6 The SSB’s expenditure, uncompensated and compensated elasticity be

separated by the quintile of household

There are expenditure quintiles, corresponding to levels of income, from lowest level (quintile 1) to highest level (quintile 5)

As can be seen from figure 4.6, the percentage of SSB consumer in each expenditure quintile gradually increased from the lowest level of expenses (53.24%) to the highest level of expenses (81.22%) In contrast, the absolute value of elasticities declined

1.036 1.001 0.976

0.854 0.813

-1.193-1.281 -1.203 -1.159 -1.139 -1.138

-1.288 -1.242 -1.212 -1.207

53.24%

67.92% 71.71%

78.79% 81.22%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00%

-1.500 -1.000 -0.500 0.000 0.500 1.000 1.500

1

Expenditure elasticity Compensated elasticity

43

from the low to the high The result showed that all household will refrain their budget for SSB if the new tax policy is imposed, and the household in the lowest quintile will be affected most by this decision

4.3.5 Six regions in Vietnam

It is undeniable that consuming behaviors in different geographical regions because of differences in culture of climate features

Figure 4.7 The SSB’s expenditure, uncompensated and compensated elasticity be

separated by six regions in Vietnam

In Vietnam, it can be seen from the figure 4.7 that the percentage of SSB consumer in each region varies from North to South, in which region in the North, Midlands and Northern Mountains, have the lowest proportion (56.44%) Then, the ratio increases from North to South The region that has the highest proportion is South East (85.38%) It is easy to explain by the differences in nature conditions In the North, there are seasons, spring, summer, autumn and winter, whereas the South is said to be hot throughout the year, which pushes consumers to spend more on beverages Added to that, Midlands and Northern Mountains is a mountainous area with relatively cool weather, but also the poorest region, with 13.8% households be

1.02 1.03 1.04 1.04

0.75

0.92

-0.89 -0.76

-1.14 -1.05 -1.09

-1.24 -0.98 -0.85

-1.23 -1.14 -1.16

-1.31 65.66% 56.44% 71.02% 79.42% 85.38% 71.81% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50

Red River Delta Midlands and Northern Mountains North Central and Central Coast Central Highlands

South East Mekong River

Delta

Expenditure elasticity Compensated elasticity

44

rated poor (General Statistics Office, 2018)– the highest rate among six regions in Vietnam Therefore, they may not be able to spend money on leisure commodity like soft drinks In contrast, South East region has the lowest rate of poor household (0.6%) (General Statistics Office, 2018) and the weather here is quite hot However, Central Highlands, the second poorest region in Vietnam, also contributes a high percentage of SSB consumer (79.42%), rank second among six regions

The differences in climate also leads to the alteration in SSB elasticities The region that has lowest percentage of SSB consumer - Midlands and Northern Mountains, also has the lowest SSB uncompensated elasticity (0.85), which means that if the price of SSB increases by 1%, the consumed amount of SSB only declines by 0.85% This maybe because soft drink is not a popular commodity here The second low position belongs to Red River Delta (-0.98) The uncompensated elasticity is highest in Mekong River Delta (-1.31), which means that this is the most sensitive region to the price of SSB However, two regions that have the highest percentage of SSB consumer, South East (85.38%) and Central Highlands (79.42%), just have average SSB uncompensated elasticities, -1.16 and -1.14 respectively

4.3.6 Regular and holiday consumption

As shown in the previous part, we can see that the time affect expressively on the amount of SSB consumers To be more detailed, the percentage of SSB consumer in special holidays will increase to 66.51% in comparison to 29.89% of regular consumers The percentage of consumer who consumed in both periods was only 26.63% These number show that SSB not appears so much in Vietnamese consuming basket Consumers are more likely to buy SSB in special occasion like national or ethnic holidays

45

consumed”, which means that if the household in these two samples decides to raise their total expenditure, they will decline their budget share on SSB The contradiction in this result is that the consumption frequency of these group is higher than another group, but they are ready to cut down their consumption of SSB once the total expenditure increase The reason maybe because for households who only consume in the holiday, SSB is treated as a special drink that used to receive the guests In addition, in Vietnam, people tend to seem holidays as occasions for relaxing so they will pamper themselves by drinking or eating whatever they want As a result, they are ready to spend more money on SSB In contrast, people who regularly consume this kind of product may acknowledge that SSB is not a necessary commodity in their basket, so they can easily remove or decline its consumption amount In addition to that, SSB is just a small part of beverage market in Vietnam, which is rapidly expanding in recent years with the opening of many coffee shop or milk tea shop Parallel with the development of e-commence, consumers are encouraged to buy variety beverage products but not limited within instant, canned or bottled drinks As a result, if their expenditure level increases, they can shift their choices to other items, coffee or milk tea for example, which are fresher, taste better and are more luxurious than soft drinks investigated in VHLSS

Figure 4.8 The SSB’s expenditure, uncompensated and compensated elasticity be

separated by time of consuming 0.58 -0.33 -0.31 -1.17 -0.71 -0.73 -1.22 -0.69 -0.71 66.51% 29.89% 26.63% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% -1.40 -1.20 -1.00 -0.80 -0.60 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80

Consumed in holiday Regularly consumed Both holiday and regular

consumed

46

4.4 Welfare effects

After estimating the compensated elasticity, the research tried to measure the welfare effects of the new tax policy by calculating compensating variation (CV) This number represents for the changes in welfare in money metric when price is changed but keep the initial utility level By estimating CV, the research can answer the question of how much consumer will lose or gain if the tax policy is implemented This research supposed that the new tax policy applying on SSB at 10% will lead to an increasing by 10% in SSB price In that case, on average, the CV is as table 4.2 Table 4.2 Compensating Variation by categories if applying 10% excise tax on SSB

CV per household

All sample (n=9382) -27.843

Urban/Rural area

Urban -43.189

Rural -21.237

Majority/Minority

Majority -29.669

Minority -19.055

The number of children

0 -21.697

1 -29.611

2 -36.631

3 -28.225

4 -23.704

More than -29.149

The expenditure quintile

1 (Lowest) -9.239

2 -17.431

47

4 -37.248

5 (Highest) -53.805

The region

Red River Delta -22.854

Midlands and Northern Mountains -20.468 North Central and Central Coast -27.064

Central Highlands -46.700

South East -60.475

Mekong Delta River -14.680

The table 4.2 showed that CV for all sample and CV for each category was negative, which means that on welfare aspect, the new tax policy has bad effect on consumer On average, the CV of consumer will be decline by 27.84 thousand dongs

However, the positive effect of this tax policy is that, the level of decreasing welfare of is higher in urban area (-43.19 thousand dongs) and majority ethnicity (-29.67 thousand dongs) in comparison to rural area (-21.24 thousand dongs) and minority ethnicity (-19.05 thousand dongs), respectively In addition, the lower the quintile is, the lower welfare is lost Whereas a household in the lowest quintile may lose 9.23 thousand dongs, the highest level one is possibly deprived of -53.81 thousand dongs The result pointed out that the excise tax policy on SSB is not a regressive but can ensure the equality of different household groups

Nevertheless, considering the welfare of households with different number of children, the household with children will lose the biggest welfare (36.63 thousand dongs), followed by the household with one (29.61 thousand dongs), four (29.14 thousand dongs) and three (28.23 thousand dongs) children

48

not the group that will lose lowest welfare, but it is the households in Mekong Delta River, despite of big proportion of SSB consumer there

In short, losing welfare is inevitable when implementing any policy instrument With the new tax proposal, welfare of the whole society will be lost, but it may also be a reason for them to decrease their consumed amount

4.5 Discussion

Taxing SSB is now becoming popular around the world because more and more governments are afraid of the effects of obesity on their socio-economy Although being considered as a country that has a moderate weight (BMI<25), Vietnam are now considering the imposition of this tax policy at the tax rate of 10% or 20% That is why this research would like to measure the consumption impacts of SSB excise tax in the context of Vietnam It should be noted that the international experiences have showed different impacts, which is the basis to raise fierce controversy regarding to this issue

After examining the data, we can see that in Vietnam, despite of increasing trend of SSB consumers, they normally consume this kind of product in special occasions like New Year holiday or celebrations In addition, the number of loyal SSB households are not very high It can be said that, SSB is not a necessary commodity in Vietnam due to its high own-price elasticity To be more detailed, AIDS results showed that if the price increased by 1%, each household would decline 1.22% their expenditure on this product This number is quite high in comparison to other food items and other beverages, which are mostly under 1% It can be said that the tax policy is quite effective in consuming orientation for citizens This outcome also fits with the objective of the tax policy, which is to reduce the consumed amount of SSB, so that Vietnam can improve the suffering of O&O currently This argument supports to the imposition of excise tax policy on SSB in Vietnam

49

these objects rather than another vulnerable side In addition, there is a close relationship between expenditure quintile and the consumption of SSB, there are more SSB consuming household in higher quantile than in lower quintile This may be because of SSB is normally treated as a leisure beverage but not a necessary commodity, which is usually served in special occasions like Tet holiday or in the gathering day of the whole family Therefore, people in the low expenditure quintile rarely consume it, in comparison to higher quintile Added to that, regions with different features of climate and socio-economy also affect to the expenditure choice of households For example, the poorest region like Midlands and Northern Mountains had the proportion of SSB consumer lowest among six regions Whereas, the hot land throughout the year like South East or Central Highland had the highest numbers The households in these places also lose biggest amount of welfare in comparison to the others From above arguments, we can see that with the purpose of decreasing the consumed amount of SSB, the new tax policy can partly reach the objectives Those who are most affected by this tax policy will be the households that consumed SSB most with higher own-price elasticity Added to that, with the figure of losing welfare, we can see that this tax policy is quite equal to the society in term of welfare because the one that will lose welfare most will also be the one who consumed SSB most

On the other hand, the research also showed that the number of children in the household also influences on SSB consuming behavior The households with only one child are more likely to consume SSB than the other and if the children in the household increase, the percentage of SSB consuming household decline This phenomenon can be explained by the psychology effects of having the first child, which means the other member in the family will give the child as much as they can to show their loves In addition, in comparison to families with more than one child, the family may be able to handle with the increasing expenditure

50

(approximately 0.78%) Furthermore, despite of this loss can be offset by the improvement in the national health, it should be noted that the ratio of Vietnamese people who are suffering from O&O is very limited compared to other countries Added to that, AIDS result also showed that wine, beer, and other beverages has been demonstrated to be the substitute beverages of SSB, whereas sugar or candy are the complementary food items Therefore, if the tax policy is imposed on SSB, lots of household will re-distribute their budget to unhealthy products like wine or beer but they seem to limit their spending on some other sugar-containing products Consequently, Vietnamese government must possibly deal with other diseases and other evils

51

could not reject the positive impacts of the tax policy, for example, it will generate an increasing in government revenue up to USD 8.46 million and significantly decline the consumed amount of carbonated soft drinks It should be noted that the decrease in soft drink consumption is always the main objective of the tax policy and it also aimed to solve the problem of public debt and deficit government budget In other words, the research had proved that Vietnamese government could achieve the initial objective of the tax policy Meanwhile, the research of Phong and Thai (2017) insisted that the proposal cannot achieve economic and equal property of a good tax policy, and simplicity property is hard to reach (Phong & Thai, 2017) It is undeniable that tax policy will cause a specific welfare loss to the economy, which government should pay attention to However, it is not true to say that the tax will not ensure the vertical equity because the current research has proved out that the higher amount of SSB consumers consume, the higher loss they have and the stronger response to tax policy they

52

CHAPTER 5: CONCLUSION

In this research, the author tried to evaluate the consumption impacts of proposing SSB excise tax in Vietnam with two questions Should Vietnamese government impose excise tax on sugar-sweetened beverages? And if they decided to implement this tax proposal, what should they pay attention to? Using AIDS, a flexible demand system developed by Deaton and Muellbauer (1980), and computing CV, an indicator represents for welfare effects, the research is able to answer above questions

5.1 Policy implication

5.1.1 Imposing tax on SSB in combination with encouraging a healthy lifestyle

In general, any policy has its own advantages and disadvantages However, for consumer orientation, the imposition of SSB excise tax can be an effective way because it will make people to limit their consumption significantly as not being a necessary commodity In addition, the above result shows that the households that consume a big amount of SSB will be influenced most due to the decreasing in their welfare is the bigger than the others

53

In addition, how and to what extent people consume energy is also affecting to the suffering of O&O As claiming by WHO, the increasing in physical inactivity, especially in modern world, lead to stagnant energy, which means that intake energy does not have a chance to be released Therefore, they suggest people to participate into daily physical activity for 60 minutes/day to children and 150 minutes/week to adult (World Health Organization, 2018) In addition, according to a study conducted in 2018, approximately a quarter Vietnamese are insufficient physical activity, in which women are seemed to be less active than men, 30.6% versus 19.9% (Guthold, Stevens, Riley, & Bull, 2018) An online survey conducted by Cint across 14,356 respondence in Vietnam in 2018 showed that around 37% of Vietnamese not enough exercise per week (150 minutes as recommended by WHO)

Figure 5.1 The number of hours that Vietnamese spend on doing exercise Reprinted

from Statista (2019)

Added to that, consumers should be acknowledged about overweight and obesity in Vietnam and how to prevent it, especially for the household that have low number of children Besides that, nutrition should also be paid more attention in daily diet, exclusively for parents, grandparents and even for educational organizations

54

5.1.2 Learning from international experiences and pay attention to some specific groups

International experiences showed that imposing excise tax on SSBs did not merely increase their prices but also led to several issues that required governmental concerns For example, the tax may not strong enough to force consumers renounce SSB or they may easily shift their favorite beverages to another similar alternative Added to that, implementing the tax policy may require a significant amount of administrative cost, which is similar to the case in Denmark Added to that, several bad effects have been provisioned by the economists, which was mentioned in the first part Therefore, for an effective tax policy, Vietnam should follow consistently to the tax policy to adjust it on time

The above results showed that the new tax policy will lead to lose the welfare of entire economy, which an undeniable consequence when intervening into the free market Therefore, the authority should pay attention to some vulnerable groups, for example, the groups that are nurturing children or the households living in South East area, which consumed a big amount of SSB and losing abundant welfare because of their consuming decision

5.2 Further Study

This study focused only on the impact of SSB excise tax policy from the consumption side, which means that it is a partial equilibrium system, so it has its own limitation To entirely understand about the possible consequence of this tax proposal, there should have other research focus on the supply side as well as focus on the impacts on the whole economy Therefore, researchers, citizens, governmental authority and other stakeholders can have broader vision to this tax policy

55

However, lots of studies, including this one cannot directly evaluate this effect due to lack of necessary data and knowledge

Besides this, because this tax policy has its own pros and cons, there should have pre and post-tax research once it is implemented By that way, the governmental authority can know how and when to adjust the tax policy

5.3 Limitations

Although being put so much efforts, this study still has its own limitations

Firstly, regarding to the dataset, from 2016 VHLSS has been aggregated data for both SSBs and other non-sugary drinks, for example bottled water in the dataset Therefore, the number of SSB consumer in VHLSS may be higher than that in reality Because the excise tax policy is becoming popular around the world and Vietnam is also considering it, this investigating should separate them for a better evaluation in the future

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p=27881985004847809&_adf.ctrl-state=tw53qidqi_4#!%40%40%3F_afrLoop%3D27881985004847809%26ce nterWidth%3D100%2525%26leftWidth%3D0%2525%26rightWidth%3D0 %2525%26showFooter%3Dfalse%26show

The Ministry of Finance (2014b, November 28) Public Debt News No.3 Retrieved March 03, 2019, from The Ministry of Finance: http://www.mof.gov.vn/webcenter/portal/btc/r/lvtc/qln/qln_chitiet?dDocNam e=BTC317039&dID=6023&_afrLoop=27881745525759468#!%40%40%3F dID%3D6023%26_afrLoop%3D27881745525759468%26dDocName%3DB TC317039%26_adf.ctrl-state%3Dnlg4g0u79_37

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p=27881985004847809&_adf.ctrl-state=tw53qidqi_4#!%40%40%3F_afrLoop%3D27881985004847809%26ce nterWidth%3D100%2525%26leftWidth%3D0%2525%26rightWidth%3D0 %2525%26showFooter%3Dfalse%26show

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p=27881985004847809&_adf.ctrl-state=tw53qidqi_4#!%40%40%3F_afrLoop%3D27881985004847809%26ce nterWidth%3D100%2525%26leftWidth%3D0%2525%26rightWidth%3D0 %2525%26showFooter%3Dfalse%26show

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World Health Organization (2018) Technical Report on: Taxation for Sugar

Sweetened Beverages in Sri Lanka, 2017 Sri Lanka: World Health

ANNEX 1: LIST OF COUNTRIES THAT ARE APPLYING SPECIFIC TAX ON SUGAR-SWEETENED BEVERAGE

No Country City Effective

date Tax rate Taxed items

1 America

Berkeley, California

March 2015

1 cent/ ounce

Sweetened drinks Exempt meal-replacement and dairy drinks, diet sodas, 100% fruit juice and alcohol Navajo

Nation April 2015

2% junk food tax

Minimal-to-no nutritional value food item, comprising SSBs

Philadelphia, Pennsylvania

January 2017

1.5 cent/ ounce

Sugar and artificially sweetened drinks

Albany,

California April 2017

1 cent/ ounce

Added caloric sweetener containing drinks Exempt 100% fruit juice, artificially sweetened beverages, infant formula, milk products, medical drinks, alcohol beverages Boulder,

Colorado July 2017

2 cents/ ounce

Added sugar and sweeteners containing beverages

Oakland,

California July 2017

1 cent/ ounce

Added caloric sweetener containing drinks Exempt 100% fruit juice, artificially sweetened beverages, infant formula, milk products, medical drinks, alcohol beverages

San

Francisco, California

January 2018

1 cent/ ounce

Seattle, Washington

January 2018

1.75 cent/ ounce

Sugary drinks, exempt diet sodas, milk-based products and fruit juice

2 Bermuda

October 2018

50% import tax

Sugar, sugary drinks, candies and dilatable

Exempt diet soda, 100% juice, diet iced tea

April 2019 75% import tax

3 Dominica September

2015

10% excise tax

Food and drinks with high sugar content, including soft drinks and energy drinks

4 Barbados August

2015

10% excise tax

Sugary drinks, including carbonated soft drinks, juice drinks and sport drinks Exempt 100% juice, coconut water, plain milk

5 Mexico January

2014

1 peso/liter ($0.05)

All drinks with added sugar Excluding milks and yogurts

6 Peru May 2018

17% tax Drinks with less than 6-gram sugar/100ml

25% tax (increased from 17% tax)

Non-alcoholic beverages with ≥ 6-gram sugar/100ml

7 Chile October

2014

10% ad-valorem tax

Drinks with less than 6.25-gram sugar/100ml

18% ad-valorem tax

Sugary drinks with ≥ 6.25-gram sugar/100ml Exempt 100% fruit juice and dairy-based beverages

8 Belgium January

2016

€0.068/liter ($0.077) excise tax

Soft drinks with added sweeteners

€0.41/liter ($0.48) or €0.68/kg ($0.79) excise tax

Concentrates

9 United

Kingdom April 2018

£0.18/liter ($0.23)

Drinks with more than 5-gram sugar/100ml

£0.24/liter ($0.32)

10 Ireland May 2018

£0.20/liter ($0.23)

Drinks with more than 5-gram sugar/100ml

£0.30/liter ($0.35)

Drinks with more than 8-gram sugar/100ml

11 France

January 2012

€0.11/1.5l ($0.12)

Drinks with added sugars or artificial sweeteners

2018 (Updated)

€20/hL ($0.23/L)

More than 11-gram sugar/100mL

12 Spain Catalonia May 2017

€0.12/L ($0.14)

Drinks with added sugars and more than 8-gram sugar/100mL

€0.08/L ($0.093)

Drinks with added sugars and to 7-gram sugar/100mL

13 Portugal February

2017

€0.08/L

Drinks with a sugar content of less than 80-gram sugar/100mL

€0.16/L

Drinks with a sugar content of more than 80-gram sugar/100mL

14 ST Helena May 2014 £0.75/liter excise duty

Carbonated drinks from 15-gram sugar/L and above

15 Norway 1981

3.39 NOK/L ($0.39)

Drinks containing added sugar or sweeteners

20.32 NOK/L ($2.48)

Syrup concentrates

16 Finland

1940 (Updated since 2011)

€0.22/L Sugar-containing soft drinks €0.11/L Sugar-free soft drinks,

mineral water

17 Estonia January

2018

€0.10/L

Drinks with to 8-gram sugar/100mL or only artificial sweeteners

€0.20/L

Drinks with to 8-gram sugar/100mL and only artificial sweeteners

€0.30/L Drinks with more than 8-gram sugar/100mL

18 Latvia

May 2004 (Increased tax rate

€0.074/L

since 2016)

than 10% added sugar, sweeteners or flavoring

19 Hungary 2011

7 HUF/L

($0.025) Soft drinks 200 HUF/L

($0.70) Syrup concentrates

20 Morocco January

2019

0.7 MAD/L VAT

($0.074)

Soft drinks and non-carbonated drinks with more than 5-gram sugar/100mL 0.6 MAD/L

($0.063) Energy drinks 0.15 MAD/L ($0.016) Nectars 0.45 MAD/L ($0.047)

Soft drinks manufacturers

21 Denmark

October 2011 - 2013

16 Kroner (£1.78)

Food and drinks items that has more than 2.3% saturated fat (World Health Organization, 2016)

22 India July 2017

12% goods and services tax

All processed packaged beverages and foods

Additional 28% goods and services tax

Aerated beverages and lemonades 23 United Arab Emirates October 2017 100% excise

tax Energy drinks 50% excise

tax

All carbonated drinks except sparkling water

24 Bahrain October

2017

100% excise

tax Energy drinks 50% excise

tax Aerated soft drinks 25 Saudi

Arabia

December 2017

100% excise

tax Energy drinks 50% excise

tax Carbonated drinks 26 Mauritius

January 2013 (Updated

MUR 0.03/gram

October 2016)

sugar ($0.00086)

27 South

Africa April 2018

0.021 ZAR/gram sugar ($0.0015)

Sugary drinks and concentrates (exempt 4g/100mL)For unlabeled sugar, default tax based on 20-gram sugar/100mL (exempt dairy drinks, fruit and vegetable juice)

28 Philippines January 2018

6 pesos/L ($0.11)

Drinks with sugar and artificial sweeteners

12 pesos/L ($0.23)

Drinks using HFCS Exempt dairy drisnk, sweetened instant coffee, sweetened drinks using coco sugar or stevia, 100% juice

29 Thailand September

2017

3-tiered ad-valorem and excise tax

Drinks with more than

6-gram sugar/100mL

The ad-valorem tax will decrease, and excise tax will be increase in the future based on the amount of sugar in the products

30 Maldives March

2017

MVR 33.64/L import tariff ($2.18)

All energy drinks MVR

4.60/L tariff ($0.30)

Soft drinks (sweetened and unsweetened carbonated sodas, sport drinks)

31 Sri Lanka November

2017

LKR 0.50/gram sugar

($0.003) or LKR 12/L ($0.068), whichever is higher

Sweetened drinks

32 Brunei April 2017

BND 4.00/10L excise tax ($0.29/L)

33 Samoa 1984 WST 0.40/L

($0.15) Carbonated beverages

34 FR

Polynesia 2002

CFD 40/L local ($0.38) or CFP 60/L import tax ($0.57)

Sweetened drinks

35 Palau 2003 $0.28175/L

import tax Carbonated soft drinks

36 Fiji

2007 (Updated in 2016 and 2017)

FJD 0.35/L local ($0.17) 15% import duty

Sweetened drinks 10% import

duty Concentrates

37 Nauru 2007 30% import

duty

Products with added sugar (with removal of bottled water levy)

38 Cook

Islands 2013

15% import duty (with 2% rise per year)

Sweetened drinks

39 Tonga 2013 Pa'anga/L

($0.44) Carbonated beverages

40 Kiribati 2014 40% excise

tax

Drinks containing added sugar and fruit concentrates Exempt 100% juice

41 Vanuatu February

2015

50 vatu/L excise

($0.44)

Carbonated beverages with added sugar or other sweeteners

ANNEX 2: DATA PROCESSING SUMMARIZE

Variable Definition/Method of processing

Food item ith

𝑞𝑖

The consumed quantity of item ith - For fresh milk: 𝑞𝑖 = 𝑞30𝑑𝑎𝑦𝑠 ×

365 30

- For other food item: 𝑞𝑖 = 𝑞𝑣𝑎𝑐𝑎𝑡𝑖𝑜𝑛+ 𝑞30𝑑𝑎𝑦𝑠 ×360 30

𝑣𝑖

The amount of money spending on item ith - For fresh milk: 𝑣𝑖 = 𝑣30𝑑𝑎𝑦𝑠×365

30

- For other food item: 𝑣𝑖 = 𝑣𝑣𝑎𝑐𝑎𝑡𝑖𝑜𝑛+ 𝑣30𝑑𝑎𝑦𝑠×360 30

𝑝𝑖

The average price of item ith:

- If 𝑞𝑖 > and 𝑣𝑖 > 0, 𝑝𝑖 was calculated: 𝑝𝑖 =𝑣𝑖

𝑞𝑖

- In other case, 𝑝𝑖 was the median value of other 𝑝𝑖 by district

- If the median value of 𝑝𝑖 by district were unable to be calculated, it was replaced by the median value of 𝑝𝑖 by province

Household characteristic

urban

Urban or rural

- urban equaled to if household was living in urban area

- urban equaled to if household was living in rural area

majorit y

Majority or minority (majority = 1, minority = 0) - majority equaled to if household had Kinh ethnic - majority equaled to if household had other ethnic hhsize The number of members in the household

exp_qu an

nchild The number of children under 16 years old in the household

reg6_1

The region that household is living: reg6_1 equaled to if household is living in Red River Delta, and reg6_1 equaled to if household is not living in Red River Delta

reg6_2

The region that household is living: reg6_2 equaled to if household is living in Midlands and Northern Mountains, and reg6_2 equaled to if household is not living in Midlands and Northern Mountains

reg6_3

The region that household is living: reg6_3 equaled to if household is living in North Centrals and Central Coast, and reg6_3 equaled to if household is not living in North Centrals and Central Coast

reg6_4

The region that household is living: reg6_3 equaled to if household is living in Central Highlands, and reg6_3 equaled to if household is not living in Central Highlands

reg6_5