The Brazilian tax reform, approved at the end of 2023, consolidated the VAT (Value Added Tax) as a taxation model in the country’s legal system. The legislative changes also introduced a new tax to the Brazilian tax system: the Selective Tax, levied on goods and services considered harmful to health or the environment, to be defined by supplementary law. Already adopted – and sometimes revoked – in other countries, the Selective Tax has a clear extra-fiscal nature, meaning it serves a non-revenue collection function.

Instead of collecting public revenues, the Selective Tax aims to influence citizens’ behavior by increasing the tax burden on goods and services that, according to Brazilian legislation, are harmful to health and the environment. As a consequence, such goods and services become more expensive and less competitive in the market, discouraging their acquisition, while untaxed goods and services become more competitive as they are cheaper.

Similar taxes have been implemented in countries such as Mexico, the United Kingdom, Finland, the United Arab Emirates, and Thailand, with the declared goal of discouraging the consumption of high-sugar, high-salt, and high-fat foods. The forms of taxation vary, with Mexico charging a Mexican peso per liter on all sugary beverages, along with an 8% tax on the value of food; whereas France charges a fixed amount per liter for any sugary beverage.

Results have also varied in each country. Finland and Denmark abolished the tax in 2017 and 2014, respectively, as they did not observe significant results in reducing the consumption of taxed foods. Mexico and the United Kingdom, on the other hand, saw a reduction in the acquisition of these products and an increase in water consumption.

The implementation of a «Sin Tax» brings risks and opportunities. On one hand, taxation can be used as an economic instrument to encourage the consumption of healthier foods. On the other hand, overtaxing may lead to an increase in the price of products that, despite having high levels of sugar, salt, and fats, such as processed foods, are more affordable to the poorer segments of the population, which is a factor to be observed, especially by less developed countries. Considering that the Selective Tax will also apply to products and services detrimental to the environment, such as fossil fuels, there are risks of a widespread increase in prices throughout the production chain if the tax is not designed considering all necessary particularities.

Brazil should pay attention to international experiences and its demographic, economic, and social specificities in regulating the Selective Tax. Although taxation is one of the tools in designing public policies, specialized literature points to the need for other complementary instruments and rigorous ex-post monitoring of results.