Impact evaluation of soft drink taxes as part of nutrition policies in Gulf Cooperation Council countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates

Introduction

Excess caloric intake is considered one of the adverse related outcomes of the sugar-sweetened beverages intake (Fidler Mis et al., 2017). This contributes to excess weight gain and the development of overweight and obesity, which in turn contribute to development of diet-related noncommunicable diseases (NCDs). WHO recommends reductions in free sugars intakes for adults and children (WHO, 2015a). Additionally, the extensive consumption of sugar is correlated with adverse health outcomes such as hyperactivity disorder and attention deficit disorder (Del-Ponte et al., 2019; Johnson et al., 2011).

The prevalence rate of obesity and overweight is high in the Eastern Mediterranean Region (EMR) and rates continue to rise. Among adults, age-standardized prevalence of overweight (including obesity) rose from 23.55 in 1975 to 31.8% in 2016, and within the Region there is substantial variation (Al-Jawaldeh et al., 2020). Around 6% of children under five are overweight (Al-Jawaldeh et al., 2020), which is greater than the global average rate of 6.2% (WHO, 2016a). Prevalence among children and adolescents (5–19 years) has increased dramatically from 7.4% in 1975 to 27.4% in 2016 (Al-Jawaldeh et al., 2020). Furthermore, the rate is even higher for children living in Gulf Cooperation Council (GCC) countries (Abdul-Rasoul, 2012). Obesity in children increases the risk of experiencing difficulties in breathing and mental health issues and is an early cardiovascular disease marker (Pizzi & Vroman, 2013; WHO, 2016a). Moreover, obesity in children can negatively affect their educational attainments and quality of life. In addition, obesity in childhood is related to a high risk of obesity in adulthood, diabetes, and cardiovascular diseases (WHO, 2016c). Notably, there is a strong correlation between obesity and prevalence of diabetes (World Health Statistics, 2016). Figure 1–Figure 3 show the increase in prevalence of childhood obesity, overweight, and deaths due to diabetes in the GCC from 2010 to 2016.

Figure 1. Prevalence Rate of overweight children from 2012 to 2016 in Gulf Cooperation Council countries.

Source: WHO: 1- http://apps.who.int/gho/data/view.main.CTRY2430A; 2- http://apps.who.int/gho/data/view.main.CTRY2450A?lang=en; 3-http://apps.who.int/gho/data/view.main.2464ESTSTANDARD; 4- http://apps.who.int/gho/data/view.main.NCDRGLUCAv.

Figure 2. Prevalence Rate of obesity in children from 2012 to 2016 in Gulf Cooperation Council countries.

Source: the data were collected by WHO: 1- http://apps.who.int/gho/data/view.main.CTRY2430A; 2- http://apps.who.int/gho/data/view.main.CTRY2450A?lang=en; 3-http://apps.who.int/gho/data/view.main.2464ESTSTANDARD; 4- http://apps.who.int/gho/data/view.main.NCDRGLUCAv.

Figure 3. Number of Deaths due to diabetes in children from 2010 to 2016 in Gulf Cooperation Council countries.

Source: http://apps.who.int/gho/data/view.main.NCDDEATHCAUSESNUMBERv.

Faced with this situation, GCC countries have imposed policies that aim to decrease prevalence of obesity, overweight, and diabetes. Such policies are part of an operational policy for diabetes that has been implemented in all GCC countries, except Oman, and an operational policy to reduce unhealthy diet related to NCDs, which was introduced in 2017 in all GCC countries (WHO, 2016b). One of the most important policies that has been implemented is the imposition of taxes on sugar-sweetened beverages (SSB), with the aim of reducing soft drink sales and consumption in order to contribute to reductions in the prevalence rates of obesity and overweight, which threaten to undermine health and, thus, the whole economy in the short and long term. GCC countries adopted a 50% tax on carbonated drinks and 100% tax in energy drinks in 2016 (Whitehead, 2019). Saudi Arabia was the pioneer in implementation of the tax followed by United Arab Emirates (UAE) (these two countries implemented the taxes on SSB in 2017) and then Bahrain, also in 2017. Oman and Qatar proceeded with the implementation at the beginning of 2019, and Kuwait in 2020 (Table 1) (Whitehead, 2019).

WHO recommends introduction of taxes on sugar-sweetened beverages (SSBs), but this does not negate the importance of the government’s role in running awareness campaigns. Such campaigns are crucial to raise awareness of children and parents of good nutrition, and can support the application of SSB taxes to reduce sugar intakes. These campaigns are important because children’s food preferences can be affected by their parent’s preferences, mass media and food marketing, peer group, nutritional knowledge, and socio-economic factors (McCullough et al., 2004). Educating children about proper nutrients is essential via nutrition education programs in schools and pre-schools. Nutrition education programs are more effective when they are implemented for long periods (Kim et al., 2018; Sullivan & Birch, 1990; Yeom & Cho, 2016). It is now clear that information and education activities need to be accompanied by a variety of complementary food environment measures to promote and facilitate healthy diets, including fiscal policies (taxes/subsidies, nutrition labelling, standards for foods in public institutions and use of food standards/legislation and food reformulation programmes to improve the nutritional quality of food (WHO, 2017)

Methods

This paper measured the impact of sin taxes on SSB using a panel data set that covers sales volumes of soft drinks in the GCC from 2010 to 2020. The data were secondary data collected by Global Company Intelligence (GCI) (Underlying data (Megally, 2020)), which is a company that specializes in collecting data from national governments and international industrial companies. GCI created a report for the authors with the following variables for the period 2010–2020 of the GCC countries Saudi Arabia, UAE, Bahrain, Oman, Qatar and Kuwait: consumption volumes of soft drinks in million liters per year, percentage growth from previous period to current (PP Growth %), percentage growth from previous period to current period in million litres, and value of soft drinks in million dollars and local currency of each country per year.

The results have been analysed using STATA 15.0 starting with descriptive statistics, then testing the normal distribution of the time series of both independent and dependent variables using the Shapiro-Wilk test. Finally, the impact of sin taxes on sales volumes has been tested via t-tests, average treatment effects, difference-in-difference estimation, and separate regression analysis.

Measuring the average treatment effect and the difference-in-difference necessitate a random selection of the treatment and control groups conditioning on some observed characteristics X. This enhances an unbiased estimation of the treatment effect. Ravallion (2007) has illustrated a model to simplify the idea by assuming Y_i (1) as $Y_i^T$ and Y_i (0) as $Y_i^C$ where the following equation can be applied to a subsample of treated and untreated as follows:

One single regression can be estimated by pooling the data for both treatment and control groups ending up with the following:

where ${\epsilon }_i=T_i({\mu }_i^T-{\mu }_i^C)+{\mu }_i^C.$ Hence, the treatment effect that can be derived from Equation 3 can be represented in A^TT = E(Y_i | T_i = 1, X) = E[α^T - α^C + X_i(β^T - β^C)]. A^TT refers to the treatment effect on the treated only. Given Equation 3, the treatment effect can be consistently estimated with OLS under the following assumption $E({\mu }_i^T|X,T=t)=E({\mu }_i^C|X,T=t)=0,t=\{0,1\}$ that predicts no selection bias because of randomization. Practically, the common impact-model is usually assuming β^T = β^C, resulting with the average treatment effect ATE as α^T - α^C.

For the difference-in-difference, let’s assume the binary regressor explained as follows

Assuming that y_it fixed effects model with

Where α_i is an individual-specific is fixed effect, and δ_t is a time-specific fixed effect. This is equivalent to regressing y_it on D_it as well as fixed effects of set of time dummies and individual-specific effects. If there are no other regressors for simplicity, the individual effects α_i can be reduced by first differencing concluding

In this view, the impact of the treatment ϕ can be estimated by pooled OLS regression of Δy_it on ΔD_it as well as time dummies set.

If we considered two period of time only instead of set of time periods assuming that treatment takes place in period 2 only, so for all individuals in period 1 D_i1=0, but in period 2 D_i2 = 0 only for the untreated individuals and D_i2 = 1 for the treated. Hence t subscript can be dropped from (6) to end up with

Where D_i is a binary variable indicates whether the individual in the treated or untreated group. In that view, OLS regression of Δy on the binary regressor D and an intercept can be used to estimate the treatment effect. If we defined the sample average of Δy_i for the treated by $\Delta {\overline{y}}^{tr}$ where D_i =1 and the sample average of Δy_i for the nontreated is defined by $\Delta {\overline{y}}^{nt}$ where D_i = 0. Accordingly, the estimator of the OLS will be reduced to

This estimator represents the differences-in-differences (DID) estimator. It is called difference in difference as one of the differences estimates the difference in time for both the treated and nontreated groups and then this difference is taken in the time differences. Definitely, this can be extended from panel data to separate cross sections data if they are available in the two periods. The averages for the treated and untreated groups in the first period will be denoted in ${\overline{y}}_1^{tr}$ and ${\overline{y}}_1^{nt}$ and similar averages for both groups in period 2 can be denoted in ${\overline{y}}_2^{tr}$ and ${\overline{y}}_2^{nt}$. This will be applicable if it possible that the individual has been identified as treated or untreated in the first period. Hence, the estimator will be as follows:

A consistent estimation of ϕ for preceding formulation of the DID estimator requires certain assumptions. First assumption states that the time effects δ_t are common between the untreated and treated groups. Second assumption assumes stability of composing treated and untreated groups before and after the assignment of the treatment as the fixed effects α_i is eliminated with panel data differencing. For the repeated cross-section data, it is implied from model (5) that ${\overline{y}}_t^{tr}$ and ${\overline{y}}_t^{nt}$ are denoted as follows:

Considering the occurrence of the treatment in the second period only, the following will bring about:

Where $v=({\overline{\epsilon }}_2^{tr}-{\overline{\epsilon }}_1^{tr})-({\overline{\epsilon }}_2^{nt}-{\overline{\epsilon }}_1^{nt}),$ The consistency of $\widehat{\varphi }$ as in Equation (9) will occur if the assignment of the treatment is random and if plim $({\overline{\alpha }}_2^{tr}-{\overline{\alpha }}_1^{tr})=0$ and $({\overline{\alpha }}_2^{nt}-{\overline{\alpha }}_1^{nt})=0$

Results

Table 2 shows the decline in percentage change of SSB sales following imposition of soft drink taxes, from 2016 to 2020 in all countries assessed. This reflects the preliminary effect of excise taxes on sales, as will be further explained in the following sub-sections. Saudi Arabia and UAE had implemented excise taxes on SSB in 2017, followed by Bahrain. Oman and Qatar implementing the policy by the beginning of 2019 and then finally Kuwait implemented in 2020 (Table 1) (Whitehead, 2019).

The growth rate of sales volumes decreased from 5.44% to 1.33% in Saudi Arabia, 7.37% to 5.93% in UAE, and 5.25% to 5.09% in Bahrain from 2016 to 2017. The growth rate of sales volumes in Oman showed a drop from 2018 to 2019 (Oman: 3.60% to 2.99%), Qatar showed a decrease in sales growth in the years following implementation of the excise taxes from 2019 to 2020 (Qatar: 3.78% to 2.45%). In Kuwait, the growth rate of sales volumes decreased from 6.31% to 5.47% from 2019 to 2020.

Estimating the impact of soft drink taxes on the change in sales volume over years

Growth in sales volume of soft drinks decreased when specific taxes have been applied, as shown in Figure 4. The increasing trend in sales volume of SSB between 2010 and 2020 can be observed. However, the rate of change of sales volume starts to decrease sharply in 2017 in Saudi Arabia, Bahrain and UAE, and 2019 in Qatar and Oman, which is when soft drink taxes were, applied (Figure 5).

Figure 4. Sales volume of sugar-sweetened beverages between 2010 and 2020 in Gulf Cooperation Council countries.

Figure 5. Percentage point change of sales volumes of sugar-sweetened beverages between 2010 and 2020 in Gulf Cooperation Council countries.

Discussion

NCDs are a major cause of death and disability in GCC countries. In Qatar, NCDs are responsible for more than half of deaths every year. More than two-thirds of the population (70.1%) are overweight or obese — with women more likely than men to be affected by obesity — and more than quarter (27%) of school children suffer from one or more forms of malnutrition (overweight, obesity, underweight or stunted growth). As in other countries of the Eastern Mediterranean Region, Qatar suffers from a high burden of NCD-related risk factors, such as physical inactivity, tobacco use, and unhealthy diets high in salt, sugar and fat (Al-Kaabi & Atherton, 2015). Similarly, UAE children are facing increased risk of obesity and overweight, and the frequency of obesity among youth is two to three times more than the global average. The implications of childhood obesity on public health are profoundly increased for UAE children and adults, since overweight and obesity increase (Al-Haddad et al., 2005; Malik & Bakir, 2007).

In Oman, it had been shown that 25.7% of 15-19 aged Omani girls were obese/overweight. Based on the high consumption of sugary drinks among adolescents, as well as other practices that are categorized as unhealthy dietary practices, obesity among children is becoming an increasingly serious concern (Alasfoor et al., 2007; WHO & Oman MOH, 2017; WHO & Oman MOH, 2010). Similar prevalence rates were observed in Bahrain where the prevalence of obesity and overweight in males ranged from 15.7% to 28.9% and from 21.1% to 30.7% among females. High consumption of fast food, sugary beverages, chocolates and sweets are expected to have the highest contribution to the high prevalence rates of obesity in children in Bahrain (Musaiger et al., 2011). It has been also observed that obesity is considered a problem among Bahraini school children that has led to calls for interventions to eradicate obesity among schoolchildren (Musaiger et al., 2014).

Kuwait has also observed an increasing trend in overweight and obesity. Prevalence of overweight (including obesity) among adults increased from 71.7% to 73.4% from 2012 to 2016, and prevalence of obesity increased from 35.6% to 37.9% from 2012 to 2016 (WHO, 2016f). Similarly in Saudi Arabia, the obesity and overweight prevalence rate has increased alarmingly among Saudi Arabian children (Al-Hussaini et al., 2019).

Prevalence rate of obesity, overweight and deaths due to diabetes have increased in the last decade in the EMR and the rate is higher for children living in GCC countries (Abdul-Rasoul, 2012). NCDs play a major role in the high rate of deaths in GCC countries annually. Malnutrition and diet-related NCDs do not only affect adults, but schoolchildren suffer from diabetes, obesity, overweight, underweight and stunted growth (WHO, 2016d). These facts prompted GCC countries to introduce an operational policy for diabetes, and an operational policy to reduce unhealthy diet related to NCDs, which was adopted in 2017 (WHO, 2016e). There has been considerable progress in implementation of policies to tackle unhealthy diet in GCC countries, and one such policy is the introduction of a health-related tax on non-alcoholic beverages (Al-Jawaldeh et al., 2020).

The current study aimed to measure the effect of implemented excise taxes on soft drink sales. Our results showed that the rate of change in sales volume over the last decade in GCC countries started to decrease sharply in the year when health-related taxes were applied to the prices of soft drinks. Sales volumes were increasing but at decreasing rates, and the tax had a significant negative impact on the change of sales volumes over the past 10 years. However, Kuwait has applied the taxes in 2020, and it is still too early to determine the impact on the sales of SSB. In addition, the policy had been applied in the time of the COVID-19 lockdown, which may have had an impact on its effectiveness. Also, the results showed that the model did not estimate the impact of taxes on the sales volumes of SSBs in Bahrain, as the model may require more explanatory variables to explain the variation in sales due to the variation in SSB prices. Generally, the growth in sales was 2.87 percentage points lower in the treatment group countries compared to the control group. The growth rate of sales volumes decreased (Alsukait et al., 2020; Megally & Al-Jawaldeh, 2020) from 5.44% to 1.33% in Saudi Arabia, 5.25% to 5.09% in Bahrain and 7.37% to 5.93% in UAE from 2016 to 2017. In Oman, growth in sales volumes decreased between 2018 to 2019 as their excise taxes were implemented in 2019 (Oman: 3.60% to 2.99%;). Qatar showed an impact of applied taxes in the year following tax imposition, between 2019 and 2020, representing a decrease from 3.78% to 2.45%. Kuwait was the last GCC country to implement the excise taxes in 2020 and the figures shows that the growth rate of sales volumes decreased slightly from 6.31% to 5.47% between 2019 and 2020. These results suggest the application of soft drink taxes can have an impact on sales of soft drinks in countries in the EMR.

These results align with the evidence-based nutrition strategies of the United Nations Decade of Action on Nutrition 2016–2025. Studies suggest that fiscal measures of taxes and subsidies are effectiveness in shifting purchasing habits and help to promote healthy diets (Thow et al., 2014; WHO, 2015b; WHO, 2016g). The implemented excise taxes can be expected to decrease the obesity levels among children in GCC countries in the coming years. The results are in line with the experience of Mexico, which in 2012, faced with the highest level of sugary drink consumption worldwide (Valadez, 2013) along with high prevalence rates of obesity and overweight among children and adults, 30% and 71%, respectively (Barquera et al., 2013; Encuesta Nacional de Salud y Nutrición (2012), introduced a tax on SSBs. Studies show that the implemented excise taxes on SSBs played a role in decreasing the sales volumes of SSBs in Mexico (Colchero et al., 2016; Pan American Health Organization, 2015). Other studies have observed similar changes in sales volume trends, further supporting the evidence of that application of SSB taxes can result in a decrease in purchases of SSBs by 20-50%, compared to expected levels based on trends prior to introduction of the taxes (Colchero et al., 2016; Ells et al., 2015; Mozaffarian et al., 2012; Powell et al., 2013; Thow et al., 2014; WHO, 2015b; WHO, 2016g). Hence, it is recommended to apply taxes to SSBs. To maximize the effectiveness of such taxes, they should be applied to all sugar-sweetened beverages — although the original GCC measure adopted applied to carbonated drinks and energy drinks, Saudi Arabia, for example, later applied a 50% tax to other sugar-sweetened beverages. Taxes should be supported with complementary measures, such as educational programmes and restrictions on the advertising and marketing of SSBs, and are most likely to be effective as part of a wider package of measures to create healthy food environments and promote healthy diets.

Conclusions and recommendations

The need to reduce obesity among children in the EMR has received increasing attention recently, given the high prevalence rates. One health economic action is imposition of excise taxes on SSBs (Lobstein, 2014). The main aim of the current study was to measure the impact of applying soft drink taxes on the sales of SSBs in GCC countries. The estimated results showed a positive effect of applying taxes in terms of decreasing the growth in sales of soft drinks in Qatar, Oman, UAE, and Saudi Arabia, but not yet in Bahrain and Kuwait.

Accordingly, application of a tax on SSBs is recommended to be implemented in other EMR countries. Furthermore, the GCC countries and other countries in the Region are recommended to proceed with implementation of complementary policies as part of a comprehensive approach to promoting optimal nutrition and tackling unhealthy diet. These include actions to improve the nutritional quality of foods, restrictions on marketing and promotion of foods high in fats, sugars or salt, introduction of nutrition standards and healthy public procurement policies for food served or sold in schools, hospitals and other public institutions, regulatory measures requiring clear nutrition labelling (including front-of-pack labelling), and measures for education, marketing, and promotion for nutritious foods. Awareness campaigns should take place to advocate reductions in SSB consumption. These recommendations align with the recommended priority actions by the WHO for the strategy on nutrition for the EMR 2020–2030 (WHO, 2019).

Data availability