Distributional Effects of Taxation of Processed Foods in Brazil

Bernardo Dantas Pereira Coelho, Courtney Price Ivins and Roberto F. Iunes

No 10805, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines the potential distributional effects of a tax increase on processed and ultra-processed foods. Using data from the most recent Brazilian consumption survey (POF 2017/2018), it analyzes the welfare changes that households would experience when facing increased costs for these products. Using an extended cost-benefit analysis model to assess net income effects, the paper considers three distinct dimensions: changes in product expenditure, changes in medical expenditure, and changes in years of life lost. The findings suggest that the tax increase would have a progressive impact, benefiting households at the lower end of the consumption distribution in all three dimensions. Overall, the study highlights the potential for targeted taxation policies as a “triple win” to address health concerns, promote greater equity, and increase fiscal revenues.

Date: 2024-06-14
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