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TECHNICALSUPPORTFORUNIVERSALHEALTHCOVERAGEINARMENIA

THEWORLDBANK

IBRDIDA1WORLDBANKGROUP

THEIMPACTOF

HEALTHTAXES

INARMENIA

AksharSaxena

AdannaChukwuma

SeemiQaiser

ArminehManookian

GevorgMinasyan

?2023TheWorldBankGroup,1818HStreetNW,Washington,DC20433.

ThisreportwaspreparedbyWorldBankstaffwithexternalcontributions.The

findings,interpretations,andconclusionsexpressedinthisworkdonotnecessarilyreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthe

governmentstheyrepresent.TheWorldBankoriginallypublishedthisreportinEnglish(TheImpactofHealthTaxesinArmenia)in2022.Therefore,wheretherearediscrepancies,theEnglishversionwillprevail.

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DesignbyVeronicaElenaGadea,GCSDE,TheWorldBankGroup.

THEIMPACTOF

HEALTHTAXES

INARMENIA

AksharSaxena

AdannaChukwuma

SeemiQaiser

ArminehManookian

GevorgMinasyan

THEWORLDBANK

IBRDIDA1WORLDBANKGROUP

Projecting

revenuesfrom

alternativetax

andnon-tax

sources

Actuarialcosting

ofaunified

benefitspackage

thatmeets

populationhealth

careneeds

Informing

policiesto

increasepublic

financingfor

healthcare

Supportfor

strategicplanfor

primaryhealth

carefinancing,

organization,and

regulation

Assessmentof

publicfinancial

managementin

thehealth

sector

Facilitating

thealignment

ofservice

deliverywith

betterhealth

Technicalsupport

towardsUniversal

HealthCoverage

inArmenia

Reformsto

alignpublic

financingfor

healthwith

value

Supportfor

regulating,

monitoringand

payingproviders

forbetter

quality

Knowledge

exchangeson

investingin

UniversalHealth

Coverage

Convening

policyand

technical

discussionson

reformoptions

Studytourstoselected

countries

ivTHEIMPACTOFHEALTHTAXESINARMENIA

ABOUTTHISREPORT

Thisreport,TheImpactofHealthTaxesinArmenia,ispartoftheWorldBank’s

technicalsupportforuniversalhealthcoverageinArmenia.Thissupportincludes

advisoryservicesandanalyticstofacilitatethegovernment’seffortstoexpand

accesstohigh-qualityhealthcare.Thereportexplorestheeconomicandhealth

returnstoincreasingexcisetaxesonsugar-sweetenedbeverages,alcohol,and

tobaccoinArmenia.Gavi,TheVaccineAlliance,supportedthistechnicalassistance.

Modelingthe

impactoftax

optionsongrowth,

poverty,financial

protection,health

andemployment

Modeling

allocationsof

publicfinancing

inthebenefits

packageto

maximizehealth

Supportfor

strategicplan

forcontinuity

ofcareacross

providers

Assessmentof

strategic

purchasingin

thehealth

sector

Harvard-World

BankGlobal

Flagship

Courseon

HealthReform

v

TABLEOFCONTENTS

AboutthisReport

iv

TableofContents

v

Acknowledgments v

ii

AbouttheAuthors vi

ii

Acronyms

ix

ExecutiveSummary 1

Chapter1.WhyMobilizeDomesticResourcesforHealth? 3

TheEconomicandPoliticalContext 3

PopulationHealthOutcomes 4

EnsuringAccesstoHigh-QualityHealthCare 6

ARoleforTaxationtoFinanceHealthCare 7

PurposeofthisReport 10

Chapter2.ThecurrentstateofhealthandconsumptiontaxesinArmenia 11

AlcoholicBeverages 11

Sugar-SweetenedBeverages

15

TobaccoSmoking 16

Chapter3.Methods 21

ChangeinConsumptionDuetoTax 22

ChangeinTaxRevenueDuetoChangeinConsumption 23

ChangeinHealthDuetoChangeinConsumption 23

ChangeinHealthCareExpenditureDuetoChangeinHealth 23

StatisticalandModelingSoftware 24

Chapter4.Results 25

ChangeinHealthDuetoChangeinConsumption 25

ChangeinHealthCareExpenditureDuetoChangeinHealth 27

ChangeinTaxRevenueDuetoChangeinConsumption 27

Chapter5.Conclusion 29

viTHEIMPACTOFHEALTHTAXESINARMENIA

Appendix 31

Appendix1A:ConsumptionofSSBbyIncome-QuintileinArmeniain2016 31

Appendix1B:ExciseTaxesfor2020,2021,2022and2023(effective1January2022) 31

Appendix1C:BeerandSpiritExciseTaxinArmeniaandEuCountries,2021 32

Appendix1D:EstimatingthePrice-ElasticityofDemandUsingArmenianData 33

Appendix1E:PriceElasticityofDemandforAlcoholicBeveragesinArmeniain2018 34

Appendix1F:PriceElasticityofDemandforSugar-SweetenedBeverages

inArmeniain2018 34

Appendix1G:PriceElasticityofDemandforSmokinginArmeniain2018 34

Appendix1H:Price-Elasticity 35

Appendix1I:EpidemiologicalModel 35

Appendix1J:PotentialImpactFraction 36

Appendix1K:AveragePricePaidandNumberofVisitsinArmeniain2018 37

Appendix1L:HealthInsuranceCoveragebyWealthQuintileinArmeniain2015 37

Appendix1M:DistributionofPaymentSystemsinArmeniain2018 37

Appendix1N:SavingsforGovernment’sOutlayonHealthcareCosts 38

Appendix1O:SavingsforOut-of-PocketPayments 38

Appendix1P:DistributionofEstimatedTax(inAMDmillion) 39

Appendix1Q:DistributionofEstimatedTaxfromAlcoholicBeverages(inAMDmillion) 39

Appendix1R:DistributionofPrematureMortality,Health-CareExpenditureand

GovernmentSavingsDuetoVaryingPass-ThroughforSugar-SweetenedBeverages 40

Endnotes 41

AcknoWledGmenTs

vii

ACKNOWLEDGMENTS

ThisreportwassupervisedbysylvieBossoutrot(pastcountrymanager,Armenia),

carolinGeginat(countrymanager,Armenia),andTaniadmytraczenko(Practice

manager,Health,nutrition,andPopulationGlobalPractice,europe,andcentral

AsiaRegion).

TheanalysisbenefitedfromthecloseengagementoftheministryofHealthnationalInstituteofHealthandthestatisticalcommitteeoftheRepublicofArmenia.

Theauthorsaregratefultothereviewersforinsightfulfeedbackontheinitialdraftsofthereport.Theseincludedhirajsharma(senioreconomist),YoshininaomiRupasinghe(Healthspecialist),cerenozer(senioreconomist),danielleBloom(seniorHealth

Financingspecialist),andZaramkrtchyan(consultant).

TheexcellenteditorialsupportfromRichardA.B.crabbeandthesignificant

operationalassistancefromArpineAzaryanareappreciated.Allerrorsandomissionsaretheauthors’responsibility.

viii

THEIMPACTOFHEALTHTAXESINARMENIA

ABOUTTHEAUTHORS

AksharSaxenaisanAssistantProfessorofeconomicsatthenanyangTechnological

University,whereheresearcheshealtheconomicsandpubliceconomics.Aksharhas

consultedfortheministryofHealthinsingapore,theWorldBank,andtheUnitedstates

AgencyforInternationaldevelopment.AksharholdsamasterinPublicPolicyfromtheleekuanYewschoolofPublicPolicyandadoctorofsciencedegreefromHarvardUniversity.

AdannaChukwumaisaseniorHealtheconomistintheHealth,nutrition,andPopulationGlobalPractice,wheresheleadsinvestmentoperations’design,implementation,and

evaluation.shehasovertenyearsofexperienceadvisingnationalreformstoimprove

accesstohigh-qualityhealthcarethroughservicedeliveryorganization,strategic

purchasing,revenuemobilization,anddemandgeneration,includinginsrilanka,sierraleone,India,moldova,Tajikistan,thesouthcaucasuscountries,andRomania.Adanna

haspublishedonhealthcarefinancing,access,andqualityinpeer-reviewedjournalsandisanAssociateeditoroftheHealthsystemsandReformjournal.sheobtainedamedicaldegreefromtheUniversityofnigeria,amasterofscienceinGlobalHealthfromthe

Universityofoxford,andadoctorofscienceinHealthsystemsfromHarvardUniversity.

SeemiQaiserisahealthsystemsprofessionalfocusingonleveragingtechnologyto

improvehealthoutcomes.sheholdsamasterofsciencefromtheHarvardT.H.chan

schoolofPublicHealthandaBachelorofsciencefromtheUniversityofToronto.seemihaspublishedonglobalhealthissuesgloballywithafocusoneastAfricaandeurope

andcentralAsia.

ArminehManookianistheWorldBankcountryeconomistforArmeniainthe

macroeconomics,Trade,andInvestmentGlobalPractice,coveringmacroeconomic

andfiscalissues,economicreporting,andmacroeconomicprojections.Inaddition,

sheisengagedinmacroeconomicpolicydialoguewiththeclient.ArminehjoinedtheBankin2017andworkedformorethantenyearsintheInternationalmonetaryFund’sResidentRepresentativeofficeinArmeniaasamacroeconomist.Beforemovingto

Armeniain2005,ArminehworkedwiththecentralBankofIranasasenioreconomistintheResearchandPolicydepartment.sheholdsamasterofPublicAdministrationineconomicPolicymanagementfromcolumbiaUniversity.

GevorgMinasyanistheHeadofthespecialstudiesdivisionatthecentralBankofArmeniaeconomicResearchdepartment.HecoordinatesthecentralBank's

development,growth,andpublicpolicyresearchprojects.Previously,heservedasIsrael'sInternationalmonetaryFundmissionmember,participatinginmacro-fiscalforecasting

modeldevelopmentandcapacitybuilding.HehasalsoworkedattheWorldBankas

aconsultant,providingtechnicalassistancetotheUniversalHealthcoverageagenda.

Gevorgcompletedthedata,economics,anddevelopmentPolicymicro-master'sdegree

fromthemassachusettsInstituteofTechnology.Inaddition,heholdsadoctorofPhilosophyfromYerevanstateUniversity.

AcRonYms

ix

ACRONYMS

ABV

Alcoholbyvolume

AIDS

AlmostIdealDemandSystem

AMD

ArmenianDram

BBP

BasicBenefitsPackage

BMI

BodyMassIndex

DM

Diabetesmellitus

EU

EuropeanUnion

FCTC

FrameworkConventiononTobaccoControl

GDP

GrossDomesticProduct

HFCS

High-fructosecornsyrup

IHD

IschemicHeartDisease

ILCS

ArmeniaIntegratedLivingConditionsSurvey

LMIC

Low-and-Middle-IncomeCountry

MoF

MinistryofFinance

MoH

MinistryofHealth

NCD

Noncommunicabledisease

OOP

Out-of-pocket

PIF

PopulationImpactFraction

RR

Relativerisk

SSB

Sugar-sweetenedbeverage

TMREL

Theoreticalminimumriskexposurelevel

UAH

Ukrainianhryvnia

UHC

UniversalHealthCoverage

UMI

Uppermiddle-income

USD

UnitedStatesDollars

YLL

Yearsoflifelost

WHO

WorldHealthOrganization

VAT

Value-AddedTax

1

EXECUTIVESUMMARY

HealthhasimprovedsignificantlyinArmeniaoverthepasttwodecades.Individualslivelonger,andfewerlivesarelosttopoormaternalcareandinfectiousdiseases.However,theburdenofnon-communicablediseases(ncds)hasincreased.Preventingand

managingncdsrequiresaccesstohigh-qualitycare.Yet,theuseofessentialservicesremainslowduetofinancialbarriersarisingfromhighout-of-pocket(ooP)payments.Forexample,thecostofcareisthereportedbarriertohealthcareamong49percentoftheextremelypoorthatforgonecessaryservices.

consumptiontaxescansupportincreasesinpublicfinancingforhealthcare,therebyreducingthestrainonArmenianhouseholds.Furthermore,excisetaxesonalcohol,

sugar-sweetenedbeverages(ssBs),andtobaccodiscouragetheconsumptionof

theseproducts,differentiallyacrossincomegroups,withimprovementsinhealthandproductivity.Hence,attherequestoftheministryofHealth,andtoinformpolicyin

Armenia,thisreportestimatestheimpactsofexcisetaxesintermsoftheassociateddecreaseinmortalityandmorbidityduetochronicdiseasescausedbyalcohol,ssBs,andtobacco,acrossincomequintiles.Theanalysisalsooutlinesthefiscalspace

generatedbytaxingtheseproducts.

Theresultsrevealthattaxingtobaccoavertsthemostdeaths:33,139over20years,

predominantlyamongthepoorestquintile(25percent)–seeesTable1below.Alcoholtaxescanprevent402deaths,50percentamongtherichest.Incontrast,ssBs’tax

canavert395deaths,withthepoorestandtherichestimpactedalmostevenly.ThetotalprojectedrevenueacrossallproductsisArmeniandram(Amd)136billion,withthemostsignificantcontributionfromtobaccotax(81percent),followedbyssBs(18

execUTIVesUmmARY

2

percent),andthenalcohol(lessthanonepercent).Taxationofalcoholicproductsisprimarilybornebythewealthiestquintiles,whilethepoorestquintilesshoulderthetaxonssBs.TheburdenofhealthcarecostsfortobaccoandssBsfallsonthemostaffluentquintile,whilethepoorestbearthecostsofhealthcareforalcohol.

ESTABLE1.Changesinhealth,taxrevenue,andhealthcarecosts

PREMATUREDEATHSAVERTED

Tobacco

Alcohol

SSBs

TAXREVENUE

(AMDMILLIONS)

HEALTHCARECOST

(AMDMILLIONS)

Tobacco

Alcohol

SSBs

Tobacco

Alcohol

SSBs

Poorest

8,151

50

82

21,445

176

6,705

3,972

10

3,972

Richest

5,903

101

73

24,145

279

4,286

2,782

47

2,782

Therefore,excisetaxesareapotentiallyviableoptiontoincreaserevenueandexpandfiscalspaceforuniversalhealthcoverage(UHc)inArmenia,whileimprovinghealth

outcomes.However,beyondtheimpactdemonstrated,anincreaseinexcisetaxeswillreflectfiscalpolicyandbroaderpoliticaleconomyfactors.

3

CHAPTER1.WHYMOBILIZE

DOMESTICRESOURCESFOR

HEALTH?

THEECONOMICANDPOLITICALCONTEXT

Armeniaisanuppermiddle-income(UmI)countryinthesouthcaucasusRegionwithapopulationof2.99million.1Thecountryconsistsof11administrativeunits:10provincesandthecapitalcity,Yerevan.one-thirdofthepopulationlivesinYerevan,28percent

intowns,and36percentinruralareas.Thecountryhasundergonesignificantpoliticalchangesoverthepast20years,includingatransitionfromthesovietUnion.

In2018,Armenia’seconomytransitionedfromlower-middle-incometoUmI2,asthe

GrossdomesticProduct(GdP)percapitahadtripledfromUnitedstatesdollars(Usd)1,404in2000toUsd4,266in2018(Table1.1).Povertyrateshavealsofallenoverthe

past20years,withtheproportionofthepopulationlivingbelowtheUmIpovertyline(Usd5.50)decreasingfrom81.0to42.5percentbetween2001and2018.Atthesametime,totalfertilityrateshavedeclinedtobelowreplacementlevels,andthepopulationaged65andoldermadeup11.3percentofthetotalpopulationin2018.

4

cHAPTeR1.WHYmoBIlIZedomesTIcResoURcesFoRHeAlTH?

TABLE1.1:Selectedsocialandeconomicindicators

COUNTRY

GDPPER

CAPITAIN

2020

(USD)

POVERTY

HEADCOUNTRATIO

AT$5.50ADAY

(2011PPP)

(%OFTHEPOPULATION)

TOTAL

FERTILITY

RATES

(BIRTHSPERWOMAN)

POPULATION

AGES65AND

OLDER

(%OF

THETOTAL

POPULATION)

GENERAL

GOVERNMENT

FINAL

CONSUMPTION

EXPENDITURE

(%OFGDP)

PROJECTEDECONOMICGROWTHIN

2022

(%OFGDP)

Armenia

4,266.0

44.0

1.8

11.8

16.0

4.5

Belarus

6,424.2

0.2

1.4

15.6

16.9

0.5

Croatia

14,134.2

2.4

1.5

21.3

24.0

5.8

Estonia

23,027.0

0.8

1.7

20.4

21.3

4.2

Georgia

4,266.7

42.0

2.1

15.3

14.7

5.8

Hungary

15,980.7

2.0

1.5

20.2

21.1

5.1

Kazakhstan

9,122.2

4.6

2.9

7.9

12.7

3.9

Kyrgyz

Republic

1,173.6

52.6

3.3

4.7

17.6

5.6

Russia

10,126.7

3.7

1.5

15.5

20.7

3.0

Tajikistan

859.1

Notavailable

3.6

3.2

11.3

4.5

Turkey

8,536.4

10.2

2.1

9.0

15.2

3.3

Turkmenistan

7,612.0

Notavailable

2.7

4.8

7.8

1.7

Ukraine

3,726.9

2.5

1.2

16.9

19.3

3.6

Uzbekistan

1,750.7

Notavailable

2.8

4.8

16.9

5.4

Source:WorldBank,InternationalmonetaryFund.

Armenia’seconomyisrecoveringfromthecoVId-19pandemic.Theeconomy

contractedbyeightpercentin2020,withtheconstructionandserviceindustriesbeingthemostaffected.3ThepopulationbelowtheUmIpovertylineisestimatedtorise

by12.8percentagepoints.Toaddressthenegativesocialandeconomicimpacts,the

governmentincreaseditsspendingby19percent,approximately2.3percentofGdP,inthefirstsevenmonthsof2020.Unfortunately,revenuedecreasedbysixpercentyearonyear.4In2022,theeconomyhasbenefittedfrommoneytransfersandvisitorsfromRussia,andgrowthisexpectedtoreachsevenpercent,priortoslowingin2023.

POPULATIONHEALTHOUTCOMES

overall,populationhealthoutcomesinArmeniahaveimprovedoverthepastdecadeduetobettermaternalandchildhealthandfewerinfectiousdiseases.Forinstance,

since1990,infantdeathshavedeclinedfrom41.7to11per1,000livebirthsin2018.5

Between2005and2018,tuberculosisalsodroppedfrom92to31newcasesper

100,000.6Asafurtherreflectionoftheoverallhealthimprovements,lifeexpectancyatbirthincreasedfrom68to75yearsinthreedecades.7

5

THEIMPACTOFHEALTHTAXESINARMENIA

However,whenaveragelifeexpectancyisadjustedforyearslivedinill-health,itfallsto66.3years.ncds,includingheartdisease(16.9percent),diabetesmellitus(5.7percent),andstroke(5.6percent),aretheleadingcausesofyearsoflifelost(Ylls)andare

expensivetotreat(Figure1.1andTable1.2).8,9,10Ahighncdburdenreducesproductivityandincreaseshealthcarespending.1ncdscosttheArmenianeconomyanestimated

Amd362.5billionin2017,amountingto6.5percentofthecountry'sannualnational

income.1ncdriskincreaseswithaging,tobacco,alcohol,andsugarexposure.11–15someoftheseriskfactorsareprevalentinArmenia.Forinstance,51.5percentofArmenianmen,ages18to69,areactivesmokers.16

FIGURE1.1:ChangeintheburdenofdiseaseinArmenia1990-2019

Bothsexes,Allages,Disability-adjustedlifeyearsper100,000

1990RANK2019RANK

1Cardiovasculardiseases1Cardiovasculardiseases

2Neoplasms

3Othernon-communicable

4Diabetes&

Chronickidneydisease

5Musculoskeletaldisorders

6Mentaldisorders

7Digestivediseases

8Unintentionalinjuries

12Respiratoryinfections&Tuberculosis

13Maternal&neonatal

2Neoplasms

3Unintentionalinjuries

4Maternal&neonatal

5Respiratoryinfections

&Tuberculosis

6Othernon-communicable

7Mentaldisorders

8Musculoskeletaldisorders

12Digestivediseases

14Diabetes&

Chronickidneydisease

samein2019increasein2019decreasein2019

Source:InstituteforHealthmetricsandevaluation(IHme),2021.

TABLE1.2:Prevalence,incidence,andmortalityofrelevantconditionsinArmeniain2018

DISEASENAME

INCIDENCE

PREVALENCE

MORTALITY

IschemicHeartDiseases

15,454

78,854

6,334

CerebrovascularDiseases

5,543

18,726

1,848

Non-Insulin-Dependent

DiabetesMellitus(TypeII)

8,114

77,642

579

LungCancer

899

2,320

1,242

LiverCancer

54

N/A

246

Source:ministryofHealthandnationalInstituteofHealth(nIH)2018.

OOPas%ofcurrenthealthexpenditure

◆Armenia

◆Turkmenistan

◆Azerbaijan

◆Tajikistan

◆Uzbekistan

Kyrgyzstan◆

Georgia

Ukraine

◆

◆Kazakhstan

R2=

0.7618

GermanyFrance

6

cHAPTeR1.WHYmoBIlIZedomesTIcResoURcesFoRHeAlTH?

ENSURINGACCESSTOHIGH-QUALITY

HEALTHCARE

Accesstohigh-qualityhealthcareiscriticalfortreatingncds.17Adequatecarecan

promotehealthylifestylestodelayncdsonset,facilitatetheirearlydiagnosis,and

preventcomplications.1However,Armenianshadanaverageoffouroutpatientvisitsperpersonin2015,muchlowerthantheaverageof7.1reportedineurope.18Thisstatistic

includestheunderutilizationofneededcare.Whensick,onlyoneinthreeArmeniansvisitahealthcarefacility.19despitethis,theministryofHealth(moH)attemptstoofferncdscreeningprograms.However,theuseofessentialhealthcareremainslow.1

Financialbarriersposeasignificantchallengetoaccessinghealthcare.Armenian

householdsshoulder85percentoftotalhealthspending.Inoneinfivecases,thecostisthemainreasonArmeniansdonotseekessentialservices.1,19Armenianhouseholdsareoftenforcedtoundertakecatastrophicexpenditures.Hence,about16percentofhouseholdsin2013spentmorethan10percentoftheirhouseholdconsumptionon

ooPhealthcareexpenditure.20AspresentedinFigure1.2,ooPhealthspendingrosefrom58.2percentin2007to84.3percentin2018,fargreaterthantheUmIaverageof32.9percent.21

FIGURE1.2:ArmeniahasoneofthehighestlevelsofOOPhealthspendingglobally

90

80

70

60

50

40

30

20

10

0

Sweden

0246810

Domesticgeneralgovernmenthealthexpenditureas%ofGDP

Source:WHoGlobalHealthexpendituredatabase,2018.

7

THEIMPACTOFHEALTHTAXESINARMENIA

onereasonforthedisproportionatehealthfinancingpressureonArmenianhouseholdsisthelowpublicspendingonhealthinArmenia.AtUsd53percapita,itisfarbelowtheaverageinUmIcountriesofUsd268.22Percapitaspendingonhealthincreasedfrom

Usd13in2000toUsd63in2016butdeclinedtoUsd53in2018duetoreductionsintotalgovernmentspendingandhealth’slowpriorityinthenationalbudget.Asaresult,thescopeanddepthofstate-fundedcoverageforcarearerelativelynarrow,withtheresultingfinancialbarriersdiscussedabove.

Previously,donorssupportedfundingforimmunization,tuberculosis,andother

programs.However,financialsupportfromdonorsisalsodecliningasArmenia

transitionstoUmIstatus,shiftingthefiscalpressuretothestatebudget.Whilethe

governmentmobilizedAmd36.37billionfromthestatebudgetandprivatedonorsto

respondtothecoVId-19pandemicin2020,itremainsuncertainwhetherthisincreaseinhealthcarefundingwillbesustained.23Theneedforincreasedpublichealthspendingremainsvitaltoensurefinancialprotectionforessentialservicesandtocoverservices

previouslysupportedbyexternalfunders.

In2015,ArmeniapledgeditscommitmenttoachievingUHctoensureeveryone

canaccessqualityhealthserviceswithoutfinancialhardship.24ThemoHdeveloped

aconceptnotefortheIntroductionofUniversalHealthcoverage,whichincludesa

proposalformobilizingrevenuestocoveraccesstotheBasicBenefitsPackage(BBP)forallArmenians.Arecentestimateoftheannualcostofprovidingessentialhealth

servicestoallpopulationgroupsisoverAmd301billion.25

AROLEFORTAXATIONTOFINANCE

HEALTHCARE

Taxationisanoptiontomobilizetheadditionalrevenueneededtofinancequality

healthcare.In2019,Armeniaraisedtaxrevenueequalto21percentofGdP,higher

thantheaverageof17percentincomparatorcountries.26Increasedpayrolltaxesisoneoftheoptionsbeingdebatedasasourceofrevenueforhealthreform.However,severalfactorslimitthepotentialforthisoption,includinganagingpopulation,lowemploymentrates,andarelativelylargeinformalsector.Armeniamightbeableto

followtheexampleoflow-and-middle-incomecountries(lmIcs),includingintheregion,byexpandingbroad-basedconsumptiontaxes(Figure1.3andBox1).In

particular,value-addedtax(VAT)andexcisetaxescanraiseadditionalrevenue.27

Revenue(%ofGDP)

30

25

20

15

10

5

0

8

cHAPTeR1.WHYmoBIlIZedomesTIcResoURcesFoRHeAlTH?

FIGURE1.3:HowhaveLMiCsraisedtaxrevenue?

TAXLEVELSANDCOMPOSITION

Thecompositionoftaxesinrichercountriesdiffersfromthatofpoorercountries,withgreateremphasisonbroad-basedconsumptionandexcisetaxes.

Trade

Corporateincometax

Personalincometax

Excisetax

Consumption

1990-992010-161990-992010-161990-992010-161990-992010-16

Low-income

Lower

Upper

Middle-Income

High-income

Middle-Income

Source:InternationalmonetaryFund.

IndiscussionwiththemoH,ananalysiswasundertakenbytheWorldBankonthe

revenuegenerationpotentialofalternativesources.Thisanalysisestimatedthe

additionalfiscalspacethatcouldbecreatedthroughincreasingexcisetaxesonalcohol,tobacco,andssBs(Table1.4).Theseexcisetaxescanalsoreducethencdburden

throughreducedconsumptionandincreasetheworkforce’sproductivity.28InArmenia,suchtaxesareadministrativelyfeasibletocollectanddonotnegativelyaffectformalemploymentcomparedtopayrolltaxes.29

TABLE1.4:Projectedrevenuefromexcisetaxesonalcohol,tobacco,andSSBs

PROJECTEDREVENUEFROMEXCISETAX(MILLIONS)

PRODUCTDESCRIPTION

2020

2021

2022

2023

2024

Alcohol

Beer

19,300

19,900

20,600

21,300

21,400

Grapewines

282

269

256

244

226

Vermouthandother

grapewines

30

27.9

26.0

24.2

22.0

Otherfermented

beverages

30.2

32.5

35.1

37.8

39.7

Ethylalcohol

10,700

14,500

18,400

20,900

23,600

Alcoholicbeverages

40,000

47,900

56,800

66,500

60,600

Brandy

648

572

504

443

387

9

THEIMPACTOFHEALTHTAXESINARMENIA

TABLE1.4:continued

PROJECTEDREVENUEFROMEXCISETAX(MILLIONS)

PRODUCTDESCRIPTION

2020

2021

2022

2023

2024

Whiskey,rum,other

alcoholicbeverages

460

471

482

493

495

Vodka

60,100

67,200

75,100

83,800

91,400

Tobacco

Industrialtobacco

substitutes

SSBs

Lemonade

0.0956

0.0951

0.0945

0.0939

0.0911

Naturalfruitjuices

0.0831

0.0951

0.0109

0.124

0.139

Othernon-alcoholicdrinks

(colas,Coca-Cola,Pepsi,etc.)

0.0497

0.0527

0.0558

0.059

0.0619

40,800

18,000

27,500

77,500

11,800

Source:WorldBank2021.

BOX1:Regionalexperiencewithconsumptiontaxes

severaleuropeanandcentralAsiancountrieshaveexperimentedwithintroducinghealthtaxestoimprovepublichealthandgeneratetaxrevenue.Particularlyin

thecaseoftobacco,whilerevenuefromexcisetaxesrangesfrom0–1.4percentofGdP,thereisthepotentialforthemtomakeupasignificantproportionof

governmentrevenue.30Below,wereflectontheexamplesofUkraine,lithuania,andlatvia.

TobaccouseinUkraineisacrucialpublichealthconcern.In2017,130,000

Ukrainiansdiedfromdiseasesattributabletotobacco.Ukrainehasratifiedthe

WorldHealthorganization’s(WHo)FrameworkconventiononTobaccocontrol,adoptingseveraltobacc