Fat Taxes - the answer to obesity?
Evidence shows that our food choices and general patterns of diet are at least partly shaped by the price and availability of products. As such, fiscal policies are powerful tools to alter patterns of diets. Some countries are now exploring fiscal measures to improve public health – this has the potential to bring significant benefit. However, concerns remain over the impact of any fiscal measures on poorer communities.
The use of subsidies on healthy foods, to offset the negative effect on equity, is emerging as an essential component of any ‘fat tax’.
Why now?
Fiscal measures on food increasingly aim to address the obesity epidemic and the growing burden of non-communicable disease, for which obesity is a major driver.
Before 1980, obesity rates were generally well below 10%. They have since doubled or tripled in many countries. The Organisation for Economic Cooperation and Development recently reported on the situation in its member states and found 50% or more of the population to be overweight. Obesity and overweight are risk factors for many types of cancer.
In practice
Denmark and Hungary are the first countries to introduce taxes on food with the specific aim of changing the population’s diet to improve health. France has recently approved plans for a tax on sugary drinks.
The Hungarian junk food tax is levied on a broad range of items including foods high in fat, sugar and salt – it thus targets less healthy foods in general. Foods that will be taxed include chips, salted nuts, energy drinks, cakes, cookies, jams, ice creams and instant soups.
Evidence for impact
A growing number of studies are now looking at the potential for economic measures, such as taxes, to change behaviour and improve health. For example, a recent study featured in the International Journal of Epidemiology estimates the potential dietary and health effects of imposing a tax on less healthy foods to reflect UK health concerns.
The researchers modeled the effects of four different scenarios (see table). They found that a tax on foods defined as ‘less healthy’ combined with a subsidy of 32.5 per cent on fruit and vegetables would prevent 3700-6400 deaths in the UK from cardiovascular disease and cancer every year.
They highlighted the importance of appropriate subsidies to offset the price increases on ‘less healthy’ foods, but suggested that taxes on unhealthy foods would have a high potential impact on people’s actions.
| Scenarios | VAT on | Effect on mortality (per year) |
|---|---|---|
| 1 | Foods that are major sources of saturated fat | 1100-2300 additional deaths |
| 2 | Foods defined as 'less healthy' | 35-1300 additional deaths |
| 3 | Foods defined as 'less healthy' coupled with an equivalent 17.5 per cent subsidy on fruits and vegetables | 1600-2900 deaths prevented |
| 4 | Foods defined as 'less healthy' coupled with a subsidy of 32.5 per cent on fruits and vegetables | 3700-6400 deaths prevented |
These findings are in line with those in our Policy Report (2009), which concluded that taxes on unhealthy foods would have a high potential impact on people's actions.
Recent research funded by the National Prevention Research Initiative highlighted the potential detrimental effect on financial circumstances of those with lower incomes. This re-emphasises the need for subsidies to offset any regressive effects of this taxation.
A balanced approach
A key message of much research is that fiscal measures should not be taken in isolation and should be supported by other policies to encourage the consumption of healthy options. This might include reducing the amount of unhealthy products on the market (through reformulation, for example), consumer information campaigns, and subsidies on vegetables and fruits, relatively unprocessed cereals (grains) and pulses (legumes).
Together, measures should be revenue neutral to ensure the overall cost of food would not increase, a likely side effect of just taxing unhealthy foods that would hit the poorest hardest. Furthermore a broader multi-nutrient approach targeting less healthy foods in general would help to avoid unintended increases in the consumption of other nutrients (such as salt, sugar).
References
Nnoaham KE et al (2009). Modelling income group differences in the health and economic impacts of targeted food taxes and subsidies. International Journal of Epidemiology Vol. 38(5): pp. 1324-33.
WCRF/AICR (2009) Policy and Action for Cancer Prevention. Washington DC: AICR
Tiffin, Richard and Arnoult, Matthieu (2011) The public health impacts of a fat tax European Journal of Clinical Nutrition doi:10.1038/ejcn.2010.281
OECD (2010), Obesity and the Economics of Prevention – Fit not Fat
