PRICE ELASTICITY OF DEMAND AND THE IMPACT OF TAXING SUGAR-SWEETENED BEVERAGES IN MALAYSIA

  • Norashidah Mohamed Nor School of Business and Economics, Universiti Putra Malaysia, 43400, UPM, Serdang, Selangor, Malaysia.
  • Wency Bui Kher Thinng Department of Economics and Corporate Administration, Faculty of Accountancy, Finance and Business, Tunku Abdul Rahman University College, Jalan Genting Kelang, Setapak, 53300 Kuala Lumpur, Malaysia
  • J. Lennert Veerman School of Medicine, Griffith University Gold Coast, Griffith University Qld 4222, Australia
  • Nazli Suhardi Ibrahim Nutrition Division, Ministry of Health Malaysia, Complex E, Federal Government Administration Center, 62590, Putra Jaya, Malaysia
  • Fatimah Zurina Mohamad Nutrition Division, Ministry of Health Malaysia, Complex E, Federal Government Administration Center, 62590, Putra Jaya, Malaysia
  • Saifuzzaman Ibrahim School of Business and Economics, Universiti Putra Malaysia, 43400, UPM, Serdang, Selangor, Malaysia.
Keywords: Sugar-sweetened beverages, price elasticity of demand, excise tax, Malaysian government, excise revenue

Abstract

The Malaysian government implemented an excise tax of MYR 0.40 per L on sugar-sweetened beverages in July 2019. Excise tax is imposed on sweetened drinks containing more than 5 g of sugar per 100 ml, flavoured Ultra High Temperature milk-based drinks, and fruit juices with more than 7 g and 12 g of sugar per 100 ml, respectively. We analysed the impact of excise tax on the consumption of SSBs by developing a demand model for SSBs to estimate the elasticity of demand using a two-way fixed-effect model. The tax increased the price of 1 L SSBs by 8.33%, and we estimated it to decrease the consumption of SSBs by 9.25%. The estimated own-price elasticity of demand for SSBs was −1.11 (95% CI: −1.97 to −0.25). Price of SSB is a determinant for SSB demand, but income or the price of milk are not. The estimated excise revenue calculated was MYR 357.61 million. However, industry responses via product reformulation and pass-through rates could reduce revenue and enhance or reduce health impacts.

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Published
2021-04-24
How to Cite
Mohamed Nor, N., Bui Kher Thinng, W., Veerman, J. L., Ibrahim, N. S., Mohamad , F. Z., & Ibrahim, S. (2021). PRICE ELASTICITY OF DEMAND AND THE IMPACT OF TAXING SUGAR-SWEETENED BEVERAGES IN MALAYSIA. Malaysian Journal of Public Health Medicine, 21(1), 223-229. https://doi.org/10.37268/mjphm/vol.21/no.1/art.794