Do tax waivers reduce prices and increase imports of healthy foods? Interrupted time-series analyses from Tonga

Introduction: It is unclear whether tax waivers are a useful public health intervention for lowering food prices and improving nutrition, or whether fiscal gains go largely to importers, wholesalers and retailers. Tonga reduced and removed 10% to 20% import tariffs and consumption taxes on a selection of healthy foods in 2013, 2015 and 2016. This study investigates the impact of these changes on retail prices and import volumes of targeted foods. Methods: Interrupted time series analysis was used to quantify the percentage changes in retail prices and import volumes in the first year after each tax waiver compared with a counterfactual based on pre-existing trends. A segmented linear regression model was run with adjustment for autocorrelation and the effects of gross domestic product, international visitors, month, exchange rate and international oil prices. Meta-analysis technique was used to summarise findings across foods. Results: On average, there was a suggestion of a small decline in retail price of tax waivered foods (-4%, CI -10% to 2%) with an average pass-through to a reduced price for consumers of 51%. Two of nine relevant foods had statistically significant evidence of price declines: frozen vegetables (-20%, CI -25% to -14%) and cooking oil (-3%, CI -5% to 0%). Overall, import volumes of tax waivered foods did not increase, and instead, there was suggestive decline (-20%, CI -45% to 15%). No import changes were statistically significant. Conclusion: While there was no evidence of increased food supply for tax waivered foods, significant price declines were observed for frozen vegetables and tinned mackerel. There was evidence of moderate pass-through of tax waivers to lower retail prices. Interpretability was limited by variability in estimates and a shift from imported to locally sourced foods. Further evaluation of tax waiver effects is needed.