Can we lower the consumption of ultra-processed foods using taxation? Evidence from Brazil

Abstract

We analyze the effects of taxation on the demand for ultra-processed foods in Brazil and its implications on the nutritional status of Brazilians using data from the 2008-2009 Brazilian Household Budget Survey. We estimated a demand system using the Quadratic Almost Ideal Demand System and, based on the elasticities obtained, performed policy simulations. Overall, the simulated taxation policies were effective in reducing the demand for ultra-processed foods, while increasing consumption of healthier foods such as fruits and vegetables. In addition, taxation contributed to make the Brazilian diet less caloric and reduce the intake of sodium, saturated fatty acid and added sugar. With such taxation, the rate of obesity and overweight in Brazil could fall by more than 10%.