Public Governance and Financing, and Earmarking Health Taxes

Ceren Ozer and Susan P Sparkes

Chapter 11 in Health Taxes:Policy and Practice, 2023, pp 307-337 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We examine the nature and impact of health taxes within the broader context of public financing systems, including considerations around earmarking of health tax revenue. As health taxes are part of larger tax systems, policies and administrations, the design and implementation of these taxes should be analysed within the context of countries’ overall tax, budgeting and governance systems. Part of these public financing issues include how the revenue from health taxes is ultimately allocated and used. As of 2017, at least 80 countries earmarked a specific source of revenues for health. While many of these country examples involve earmarking payroll or income taxes to fund healthcare, they also represent at least 54 countries that earmark all or a portion of tobacco, alcohol, or sugar-sweetened beverage (SSB) taxation for the health sector. Despite their prevalence, significant care must be exercised when considering earmarks due to clear concerns around fungibility with other sources of revenue for the sector and potential rigidities and inefficiencies that can be introduced. The specificities of earmarking vary greatly in practice and range from a spectrum of soft to hard. From a political economy perspective, soft earmarking has been shown to help to advance the adoption of new health taxes in some settings as having a notional revenue-expenditure link can boost public support. In general, the closer the practice is to standard budget process, where revenues are matched with political priorities and population needs, the more effective it is.

Keywords: Health Tax; Health Taxes; Tobacco Tax; Alcohol Tax; Sugary Drinks Tax; SSB Tax; Sugar-Sweetened Beverages Tax; Fiscal Policy; Health; Non-communicable Diseases; NCDs; Health Financing; Public Finance; Public Health (search for similar items in EconPapers)
JEL-codes: I1 I15 K32 (search for similar items in EconPapers)
Date: 2023
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