Health taxes will help solve hunger and malnutrition

“Not one more hungry Filipino.”

This was how President Ferdinand “Bongbong” R. Marcos, Jr. summarized the aspirational end result of his economic agenda a few months into his term.

Addressing the issue of hunger not only reflects our country’s long-term collective vision, it is also an ongoing and pressing concern.

Public sentiment affirms this. The Social Weather Stations’ (SWS) most recent poll estimated that nearly a tenth of Filipino families (or 2.7 million households) experienced involuntary hunger in the first quarter. This may represent an improving trend over the previous months, but the pre-COVID level of hunger was lower.

During the World Economic Forum annual meeting in January 2023, the president offered some ideas to address hunger. The first two proposals are to boost productivity in agriculture and fisheries and to invest in facilities, logistics and systems that bring nutritious food to the people. These strategic solutions will help address the country’s food supply issues, but they require significant reforms and large investments in the agricultural sector.

The president’s third proposal — promoting a nutritious lifestyle and prompting active and health-seeking behaviors — can result in immediate tangible outcomes. Most notably, the president broadens the framing of the solution for hunger to include nutrition and health programs. This will need significant funding.

In other words, the combination of health and fiscal policies (taxes and spending) will complement agricultural policy. In this way, we address our food supply and food security problems and the health and nutrition of the people.

To address hunger, we should spend big on social programs.

Eliminating hunger and malnutrition goes hand in hand with eradicating poverty. Reducing hunger and malnutrition contributes to reducing poverty. But at the same time, increasing the income of the poor contributes to improving their well-being and lifting them from the poverty threshold. After all, how can Filipinos eat a nutritious diet, or much less get enough to eat in the first place if they cannot earn a decent income to spend on food?

One million households are living below subsistence level (income is lacking to meet the basic food requirements), according to the Philippine Statistics Authority’s (PSA) most recent estimates. If we consider the poverty threshold instead, there are about 3.5 million households living below poverty.

The prevalence of food insecurity increases along with poverty. Data from the 2021 National Nutrition Survey showed that the poorest quintile of Filipino households (50.1% food insecure) are over four times more likely than the richest quintile (12.2% food insecure) to be moderately to severely food insecure. Overall, about a third of Filipinos are considered moderately to severely food insecure.

Considering this, President Marcos has given the Department of Social Welfare and Development (DSWD) the go-signal to pilot test and implement the Food Stamp Program. Once fully implemented, it is meant to cover one million food-poor families.

We maintain, however, that the food stamp program’s target of beneficiaries is not expansive and inclusive enough. The pandemic has taught us that ayuda is important not only for the food-poor but also for all those who are poor and even the near-poor (i.e., for those who are just above the poverty borderline).

Accordingly, we must go beyond hunger and address malnutrition as well. Malnutrition includes undernutrition (wasting, stunting, underweight), inadequate vitamins or minerals, overweight and obesity, and often results in diet-related noncommunicable diseases. Stunting in children, which is defined as having a lower-than-median (by two standard deviations) height for one’s age, is the result of chronic or recurrent undernutrition.

The results of the 2021 National Nutrition Survey showed that more than a fourth of infants, young and pre-school age children in the country are stunted. Meanwhile, about a fifth of children aged five to 10 and adolescents aged 10 to 19 are stunted.

Former NEDA Director-General Ciel Habito has pointed out that stunting is this country’s “silent pandemic.” Stunting reflects the lack of proper feeding and nutrition early in life. Chronic malnutrition in early childhood causes irreversible setbacks for mental and cognitive development. On a wider scale, this causes poor educational outcomes, which leads to lower productivity and therefore lower incomes.

Thus, the food stamp program should not only include transfers to address hunger; it should also be designed and implemented to ensure that pregnant women, mothers, infants and pre-school children are specifically targeted. Meeting a minimum caloric intake is not enough; mothers and children should also receive the adequate and appropriate balance of macronutrients.

Under the DSWD’s proposal for the program, the one million food-poor households will receive P3,000 a month. The modality of this transfer will be through electronic benefit transfer cards loaded with food credits that can be used to buy select food items from DSWD-registered or accredited retailers.

An initial estimate puts the cost at more than P36 billion yearly. To repeat, covering just the food-poor households will be insufficient. At the very minimum, the program ought to cover all the food insecure households among the poor. This means that the program should cover not fewer than 1.8 million households. An additional P28.8 billion worth of “food stamps” ought to be allocated.

Where to get the new funding thus becomes a central question. This is where taxation becomes relevant.

Health taxes are highly effective in raising revenues for the program. Further, taxing unhealthy consumption leads to better health outcomes. To illustrate, because of the importance of Universal Health Care, alcohol and tobacco taxes were raised and earmarked to fund it. Sin taxes also had the benefit of reducing the burden of several noncommunicable diseases associated with alcohol and tobacco consumption.

Likewise, if we truly believe that ending hunger and malnutrition among poor families, mothers and children is a worthwhile endeavor, we should mobilize the resources necessary to make this program a reality.

The proposal to increase taxes on sugary beverages and introduce excise taxes on unhealthy foods has been floated. The range of health taxes covering alcohol, tobacco, sugary beverages and junk food becomes necessary in light of the tight fiscal space to fund the health and nutrition policy.

The case for alcohol and tobacco taxation is solid. They are bad for individual and public health. Alcohol and tobacco taxation should therefore be high on the tax-reform agenda to finance the government’s social program.

The case for sugary beverages and salty food is more complex. Yes, they are likewise bad for individual and public health. But without accessible and affordable alternatives for nutritious food, higher taxes on sugary beverages and salty food will hurt the poor who must find cheap substitutes for their caloric or energy requirements.

To overcome this problem, the government should broaden the number of poor beneficiaries of the food stamp program to neutralize the increase in prices arising from the proposed taxation of sugary beverages and salty food. Government policymakers, too, should design the tax policy in a way that will encourage manufacturers of sugary beverages and junk food to reformulate their products by reducing the sugar or sodium content. Concretely, the tax will not be based on weight or volume but on a certain level of sugar or sodium threshold. Thus, a product that is below the sugar or sodium threshold will not be subject to the higher tax.

So, while the proposed sweetened beverage and junk food taxes have been dismissed by some for being anti-poor, the urgency of an ambitious pro-poor food stamp program warrants more thoughtful reconsideration for such taxes. This will entail a careful design and calibration of the tax rates to satisfy the earmarking for nutrition and health, the reduction of consumption of unhealthy products and the reformulation of such unhealthy products.

We take guidance from the vision that the country has set out to achieve: “Not one more hungry or malnourished Filipino.”

AJ Montesa heads the tax policy team of Action for Economic Reforms.