Fat tax can make a nation Healthier

By Nikita Monis and Atiyah Krishnan | Edited by Kripa Jalan and Ashna Ranade

Proposition (by Nikita Monis)

The fast-food industry has grown tremendously in the last decade and so has the consumption of it, but have you ever wondered what impact do these fast foods have on our bodies? It is observed that junk foods and foods high in fat are linked to obesity, heart diseases, strokes, cholesterol and other health-related diseases which could negatively impact individuals as well as the economy. In 2014, 30% of the adult population which accounts for 2.1 billion people were either obese or overweight and 5% of worldwide deaths were attributed to it. The global impact of obesity was estimated to be 2 trillion US dollars. Besides, it also costs the economy in the form of lost productivity and increased health care expenditure.

Many countries understand this impact and therefore some of them Denmark being the first country introduced the fat tax as a policy in 2011 to help people to make healthier choices through taxing foods that have a high fat content. This policy was also adopted in the state of Kerala in India in 2016. But does this mean that all fats are bad? Not at all, fats are essential for our body but it is important to take into account which kinds of fats and in what amounts we are consuming it. This fat tax targets foods that have a high quantity of fat especially trans fats and saturated fats which could negatively impact our health. But what impact did this tax have? Did it have any impact at all?

In Denmark where this tax was first introduced between October 2011 to January 2013, a deduction of almost 4% on average was witnessed in the consumption of saturated fats due to increased price. On the other hand, vegetable and fibre intake surged by 7.9% and 3.7% on average respectively with an estimated 123 lives owing to which were saved per year, According to the study published in the European Journal of clinical nutrition. A paper published under the title ‘Will a Fat Tax Work?’ analysed and studied six years of sales data from over 1700 supermarkets across The United States and found out that when products high in fat and low in fat were priced equally people often chose the product high in fat whereas when the prices of fat foods were higher even just by 14 cents people often chose the lower fat options which also challenges the general perception that higher taxes are essential to witness a shift towards healthier options which could be regressive. This study shows that a 5 to 10% increase can also aid people to make healthier choices. These studies point out that pricing patterns do have an impact on consumers’ behaviour and therefore higher prices can negatively impact demand for foods high in fat and thus reduce the negative impact of it on individuals and the economy. 

The revenue collected from this tax could also help in boosting healthcare and infrastructure along with which government spending on the healthcare sector could diminish due to lesser consumption of unhealthy foods and beverages. According to the study titled ‘Could Targeted Food Taxes Improve Health?’ Published in August 2007 by the journal of epidemiology and health, it was estimated that the fat tax could help save up to 3200 lives in Britain each year by reducing the risk of cardiovascular diseases and strokes. This tax therefore would not only help to improve the health conditions of the population but also boost economic growth and development. Another question that arises is how much revenue could be generated and what could it be used for? Researchers estimate that a 1% national excise tax per 12 ounces of soft drinks can raise up to 1.5 billion US dollars. In the state of  Kerala in India, a 14.5% fat tax was levied in 2016 on junk food liable to multinational fast food corporations which have a vast influence on people. This could help minimize the impact of the tax on the poor population and local industries. The additional revenue generated through this tax would be diverted to the health budget which currently accounts for only 1.5% of India’s GDP(2018-19). Which would be used for developing the healthcare sector as well as to spread healthcare awareness and take up initiatives that could have a positive impact on the population’s health as well as the economy. 

A fat tax, therefore, could negatively impact the demand and supply of unhealthy foods and beverages which would help discourage consumers and producers from consuming and supplying them and therefore aid them to make healthier choices. The tax revenue collected would be used for health care and infrastructure development which would not only have a positive impact on health but also the economy. The fat tax therefore could be highly beneficial if planned and implemented properly; it could also be coupled with imposing subsidies on healthier products for it to be much more effective in its endeavour.

Opposition (by Atiyah Krishnan)

Fat tax refers to the tax incurred on junk food, that is, items low on nutrients with a high calorific value. The imposition of such tax results in a decline in the volume of unhealthy food items purchased by consumers, thus fat tax falls under the Pigouvian form of taxation. 

On the face of it, this tax seems flawless. It is expected to guide states or even nations as a whole, towards a better lifestyle by making fattening food more expensive. However, it is crucial to look at it from the producer’s point of view too. A beverage or biscuits company not only offers food, it offers returns to factors of production such as wages to employees and profits to entrepreneurs. The consumers who are on the receiving end of these products do not benefit from fat tax as expected.

There is a clear lack of unanimity when it comes to deciding what items should be subjected to the tax. Denmark levied a tax on products high in saturated fat, Mexico applies a fat tax on sugary drinks, breakfast cereals and drinks whereas, in Kerala (India), only fast food like burgers, pizzas, tacos etc incur tax. Hungary applies a tax on goods high in salt, sugar and fat. The problem arises when nutritional products get roped into taxation for being ‘high in fat’. Items like avocados, nuts, dark chocolate, fatty fish etc are packed with fats, yet extremely healthy. Per 100g of nuts contains around 50g of fat while 100g of Oreo biscuits contain 20g of the same. If tax includes Oreos based on its fat proportion, it will inevitably include nuts.

When one thinks of junk food, it is usually the processed and packaged items that taste delicious. Many food items dodge the label of being unhealthy as they are specifically advertised as ‘low-fat’ or ‘fat-free’.  It gravitates consumers who seek to achieve good health via shortcuts.  When something is said to be ‘low fat’, the fat is replaced by sugar. A lack of proper guidelines about what falls under fat tax and what doesn’t makes the tax redundant.

Secondly, the tax strong-arms its way into changing eating patterns of consumers, the direct effects of which are borne by the poor. A key advantage of junk food is its affordability that makes it everyone’s choice. There are households that have to spend about 30% of their income on food. They cannot afford to be health-conscious. Implementation of tax will be a massive blow to their budget. The motive behind taxing a certain food item is often unclear to the general public. While the human rationale says it’s obvious to promote good health, it could be a measure to relieve finances.

Proponents of the fat tax claim that it contributes to curbing obesity. Apart from overeating, physical inactivity, genetic makeup, diseases, medications etc also contribute to obesity. A surge in prices of conventionally unhealthy items will have a meagre effect on obesity rates. High eating frequency, which means having several meals at short intervals and eating more than required are two factors that contribute to excessive weight gain. The latter can be controlled by the tax as it would make people buy goods in lesser quantities. However, it is no cure for eating several times. Continuous consumption of healthy food does not yield any results if one is not physically active. 

In Denmark, in 2011, when the saturated fat tax was imposed on goods containing more than 2.3 g saturated fat per 100 g. People travelled across borders to Germany and Sweden in order to get high-saturated fat products at reduced prices. Thus, the taxation policy of Denmark became a boon for markets of its neighbouring countries. It showcased how a sudden alteration in prices was repulsed by consumers. They were willing to go to another nation in order to save money. This is likely to be the result of fat tax around the globe. Rather than spending on more nutritional food, people may resort to other means of securing desired items.

If the goal is to make people adopt healthier eating habits, it can be done through ways like spreading awareness, reducing the costs of organic foods, and making healthy products more accessible. Restraining the quantity of consumption is more important than manipulating its price. Fat tax inadvertently makes people’s choices for them without telling them why? It has a negative impact on consumption behaviour since consumers are forced to shift to healthier options for a lack of choice. 

With QSR (quick-service restaurants) chains spread across the globe, levying taxes will adversely affect their sales and profits will take a sharp dip. Though one can argue that such industries can switch to produce healthier goods, it is not that simple. The capital goods and raw materials required are quite different as the means of production are differ. Well established companies like McDonald’s and Burger King will not approve of this readjustment.

A mere taxation policy will not prove pivotal in bringing lifestyle changes. Such changes are associated with a change in mindset that cannot take place through policies but by gradual awareness.

References

NDTV. (2015, December 27). ‘fat tax’ can boost healthy foods’ demand: Study. NDTV.com.RetrievedNovember5,2021,from https://www.ndtv.com/health/fat-tax-can-boost-healthy-foods-demand-study-1259405.

Bhushan, R., Bailay, R., & S, S. (2016, July 9). In a first, Kerala imposes 14.5% ‘fat tax’ on junk food. The Economic Times. Retrieved November 7, 2021, from https://m.economictimes.com/news/politics-and-nation/in-a-first-kerala-imposes-14-5-fat-tax-on-junk-food/articleshow/53113799.cms.

Krishnamoorthy, Y., Ganesh, K., & Sakthivel, M. (2020, January 28). Fat taxation in India: A critical appraisal of need, public health impact, and challenges in nationwide implementation. Health promotion perspectives. Retrieved November 6, 2021, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7036206/#:~:text=Fat%20tax%20is%20surcharge%20or,on%20individuals%20who%20are%20overweight.&text=Imposing%20the%20taxes%20can%20raise,of%20the%20unhealthy%20food%20items.

Michail, N. (2016, April 27). Danish fat tax had a ‘small but positive impact’ on the nation’s health. foodnavigator.com. Retrieved November 5, 2021, from https://www.foodnavigator.com/Article/2016/04/27/Danish-fat-tax-had-a-small-but-positive-impact-on-the-nation-s-health.

Tremmel, M., Gerdtham, U.-G., Nilsson, P. M., & Saha, S. (2017, April 19). Economic burden of obesity: A systematic literature review. International journal of environmental research and public health. Retrieved November 5, 2021, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5409636/.

Griffiths, P. (2007, July 12). “fat tax” could save 3,200 lives each year. Reuters. RetrievedNovember7,2021,from https://www.reuters.com/article/us-britain-fat-idUSL1254236520070712.

Pti. (2020, November 19). India’s overall spending on health sector ‘low’, says Niti Aayog member. The Hindu. Retrieved November 8, 2021, from https://www.thehindu.com/news/national/indias-overall-spending-on-health-sector-low-says-niti-aayog-member/article33132569.ece.

Smed, S., Scarborough, P., Rayner, M. et al (2016). The effects of the Danish saturated fat tax on food and nutrient intake and modelled health outcomes: an econometric and comparative risk assessment evaluation. Eur J Clin Nutr 70, 681–686 .

https://doi.org/10.1038/ejcn.2016.6

Krishnamoorthy, Y., Ganesh, K., & Sakthivel, M. (2020). Fat taxation in India: A critical appraisal of need, public health impact, and challenges in nationwide implementation. Health promotion perspectives, 10(1), 8–12. 

https://doi.org/10.15171/hpp.2020.04

Kubala, J. (2018, December 3). 21 diet foods that can make you gain weight. Healthline. Retrieved November 16, 2021, from https://www.healthline.com/nutrition/foods-that-make-you-fat#TOC_TITLE_HDR_8

Obesity and overweight. (2021, June 9). WHO | World Health Organization. https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight.

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