Colombia: why a soft drinks tax is not the solution

Colombia: why a soft drinks tax is not the solution

In view of the possible introduction of a tax on soft drinks in Colombia, the newspaper El Nuevo Día interviewed the executive director of the ANDI Chamber of the Beverage Industry, Santiago López Jaramillo. The tax proposal is currently being discussed by an experts committee and will be submitted to the congress by the end of the year, although, according to López Jaramillo, the Minister of Health already requested an analysis of the potential impact of the soft drinks tax, and neither the commission of tax experts set up for the task, nor the OECD recommended it.

López Jaramillo pointed out that the people most affected by the introduction of a tax would be the lower income households, which spend a greater share of their resources on soft drinks; such an impact is of great concern especially in those rural areas where bottled drinks constitute the sole reliable source of potable water.

The negative impact goes beyond that on consumers, according to López Jaramillo the 37% of income revenue for 600 thousands Colombian families depends on the sales of soft drinks. The risk is to repeat what Mexico experienced, where 30 thousand shops closed and 10’800 jobs were lost following the introduction of a soft drinks tax. The emblematic case of Denmark is also mentioned, where a similar levy was dismantled 15 months after its introductions, as it failed to meet its health targets, while at the same time it impacted negatively the economy.

Asked about the positive effect of the tax on people’s health López Jaramillo replied that it was paradoxical that the suggested measure is the one that failed when implemented in other countries. The root of Colombian health problems lies in the population lifestyles, as Colombia is the second most sedentary country worldwide according to the WHO, he said.

 

The full article from El Nuevo Día can be found here

Australian Beverages Council replies to calls for ‘soda tax’ providing evidence on its ineffectiveness and unfairness

Australian Beverages Council replies to calls for ‘soda tax’ providing evidence on its ineffectiveness and unfairness

Like many other countries, Australia is looking for the best solution to tackle the growing problem of obesity. As many are asking for a tax on certain products, including soft drinks, the Australian Beverages Council shows why a measure of this type will not work.

First of all, recent studies have identified what has been called “Australian Paradox” – the fact that in the last years, while the refined sugar intake has dramatically decreased (26%), as well as the consumption of sweetened beverages, the prevalence of obesity in Australians was multiplied by 3. Moreover, according to a 2012 Australian Health Survey conducted by the Commonwealth Scientific and Industrial Research Organization (CSIRO), soft drinks represent just 1.7% of the average adult’s daily calorie intake. This figure shows that a tax on soft drinks would not have much effects.

In addition, similar taxes in other countries have failed: the Danish ‘fat tax’ was abolished 18 months after its introduction due to its ineffectiveness and negative impact on the economy. In 2014 also the European Commission conducted a study on the impact of food taxes, concluding that instead of increasing citizens’ health these measures provoked job losses, higher food prices and higher administrative costs.

The introduction of a soft drinks tax in Mexico has raised another fundamental concern: the 63,7% of it is collected from low income families, according to KantarWorldpanel. This illustrates how such taxes are regressive and damage the most the least well-off families.

Two more facts have to be taken into account: consumers are choosing more and more no or low calorie products and, according to a 2014 Australian survey, they strongly believe that education is the most effective way to tackle obesity.

The full statement by the Australian Beverages Council can be found here: ABC White Paper.

France’s Les Echos: “Food taxation should not be a punitive tool”

France’s Les Echos: “Food taxation should not be a punitive tool”

Who has not heard of the Nutella tax? An amendment to the 2013 French budget law foresaw an increased levy on palm oil that received the nickname “Nutella Tax”. After being voted in the Senate, it was postponed pending adoption of a draft public health law.
Based on unfounded allegations about the dangers of palm oil for health (cardiovascular risks, obesity) and the environment (worsening deforestation), the tax would have increased by 300% the levy on this single ingredient, widely used in the food industry. The tax on palm oil (€ 300 / ton) would have brought 40 million euros to the state coffers, whilst penalizing businesses and French consumers, the real victims of the proposal.

Behavioral taxation too often moves away from what is clearly established by science. The use of food taxation to promote public health objectives has so far lead to uncertain results.Taxes on sodas exist since the 1920s in the United States, but they have not yet had the expected impact on obesity and overweight.

The fact remains that education and dissemination of accurate information must be the basis of a reasoned and reasonable behavior, sense of responsibility and personal commitment to limiting excesses or addictions. Faced with a fair and consistent tax, a taxpayer may be an empowered consumer, do not treat citizens as outsiders. Taxation should not be a punitive tool!

 

The full article can be read here.

‘Sin taxes’ are regressive and impose middle class values on the working class

‘Sin taxes’ are regressive and impose middle class values on the working class

‘Sin taxes’ as a strategy to curb consumption of foods high in salt, fats and sugar are regressive and disproportionately costly for businesses and consumers, according to an economist from the Institute of Economic Affairs.

Discussing a recent report from the European Commission on the impacts of so called ‘sin taxes’, Chirstopher Snowdon, lifestyle economics director for the Institute of Economic Affairs told FoodNavigator: “There’s a  big administrative burden from these kinds of taxes and they are regressive and they do encourage a certain amount of cross border shopping.”

The author of the separate IEA report Aggressively Regressive: The ‘sin taxes’ that make the poor poorer , which focused on the Danish fat tax example, said he agreed with many of the Commission’s conclusions about possible unintended consequences.

He added such taxes put too much focus on middle class values of health wealth, and not enough on helping working class people save actual monetary wealth. In his own report last year, Snowdon said for every eight pounds spent by the poorest fifth of households in Britain, one pound was taken in ‘sin taxes’ including duty on tobacco, alcohol and motor fuels, betting taxes, vehicle excise duty, air passenger duty and ‘green taxes’.

Instead, for the food and beverage industry voluntary reformulation made better business sense and responded to consumer demand, which he said ultimately should not be ignored.

What are the consequences?

He admitted that these kinds of taxes would change consumption, however the administrative costs for the state and businesses as well as the budgetary strain it placed upon consumers could not be justified by the “trivial” changes seen in places like Denmark, where a fat tax was in place for 15-months from 2011 before being scraped for fear of inflated food prices and employment insecurity.

As with the EU report, he warned that upping taxes could see people switching to poorer quality, cheaper products, or even hopping the border to avoid the levies.

Middle class values?

Snowdon called ‘sin taxes’ a “real blind spot for the left”, saying those normally in favour of abolishing policies disproportionate to income were often conversely in favour of this tax.

He said the poorest 20% of households in Britain spent an average of £1,286 a year on ‘sin taxes’, on top of the £1,165 already spent on VAT.

He put this stance down to middle class snobbery,and criticised the left’s attitude towards working class worries over household budgets.

Asked if he saw the argument that health was a form of wealth in that those who were healthy may be more likely to be in and stay in employment,he said it was down to the individual to balance those aspects.

Public vs. private, taxes vs. reformulation

Snowdon said reformulation was a far better option than tax changes, if done voluntarily and in cooperation with government and businesses and with consumer demand in mind.

He said if such healthier alternatives were available it would be a matter of private health and personal choice, adding the attitude of public health lobbyists that the industry was purposefully poisoning its consumers was unhelpful.

Asked if it was not arguable that consumption habits were indeed a public health concern considering the long­ term implications of unhealthy eating and drinking, the free-market fan said if this stance was to be taken no line could be truly drawn between the state-controlled public and private,personal choices.

Pricing elasticity

Comparing consumption taxes on food and drink with those on tobacco,he said the latter was much more straight forward. The purpose of tobacco taxes was to stop people smoking altogether,whereas with food and drink it was to change consumption habits.

He said the price elasticity – how much people were willing to pay for something – of tobacco was wildly different to food,since food was an essential item people would do almost anything for.

 

By Annie-Rose Harrison-Dunn

Read more here

Fat taxes could hit competitiveness thanks to complex rules says EU report

Fat taxes could hit competitiveness thanks to complex rules says EU report

Taxes on foods high in sugar, salt and fat, do reduce consumption but can lead to consumers simply switching brands or finding other ways to purchase fatty foods while avoiding the tax, according to a new report from the European Commission.

Higher taxes “In general do lead to a reduction in the consumption of the taxed products,” the report concluded. However, consumers can use a variety of methods to purchase the foods they want while avoiding the tax, such as buying similar products that do no fall under same burdensome tax regime or switching brands.

Commissioned by the directorate general for enterprise and industry of the European Commission, the study also argues that fat taxes could have a damaging impact on the EU’s agri-food sector.

SMEs would be particularly vulnerable to fat taxes as consumers switch from premium brand producers to cheaper alternatives. Furthermore, taxes would increase the administrative burden, especially if the taxes are imposed on ingredients or if the rules defining which products are liable under the tax are highly differentiated and complicated.

Director of lifestyle economics at the Institute of Economic Affairs (IEA) Christopher Snowdon, told City A.M.:

It’s a basic economic principle that when prices go up, consumption goes down. But price rises have other effects, as this study shows, such as making consumers buy cheaper brands from cheaper shops. People will go to any lengths to eat the food they like, and that is why fat taxes never have any measurable effect on obesity.

The report’s warnings echo research conducted by the IEA last year on Denmark’s saturated fat tax. The tax had a variety of negative economic impacts including the loss of 1,300 Danish jobs. At least 10 per cent of the revenue generated by the tax was ploughed back into administration.

One survey found that only seven per cent of Danish consumers cut their purchases of butter, cream and cheese while 80 per cent did not change their shopping behaviour at all.

However, some Danes did switch brands, and others hopped over the border to Sweden and Germany to shop for their favourite high-fat foods.

The Danish government had hoped to collect 1bn krone (£115m) from the tax. But the amount raised came in at 1.4bn krone, suggesting that reduced saturated fat consumption was less than hoped for.

At the same time, the tax was in operation the market for crisps and snacks grew rather than diminished. Public opinion turned overwhelmingly against the tax. In October 2012, 70 per cent of Danes considered the tax to be “bad” or “very bad.” The policy was abandoned 15 months after its introduction.

UNESDA, which represents the soft drinks industry, said the Commission study, “finds hard evidence from a number of member states on the negative impact which food taxes can have on competitiveness and jobs, leading to an increase in administrative burdens.”

However, while the study made some initial conclusions, it also found that further research will be needed in order to assess more extensively the impact fat taxes could have on the competitiveness of the agri-food sector.

 

Read the full article here

EC study finds Impact of food taxes on public health inconclusive and contradictory

EC study finds Impact of food taxes on public health inconclusive and contradictory

The European Commission study into the impact of food taxes on consumption and competitiveness in the agri-food sector was published on 16 July. It aims to support policy making by gathering information on the impacts and effectiveness of food tax measures.

It concludes that when looking at whether “changes in consumption resulting from a food tax actually lead to public health improvements […] evidence from academic literature is inconclusive and sometimes contradictory” (page 13).

The study finds hard evidence from a number of Member States on the negative impact food taxes can have on competitiveness and jobs, leading to an increase in administrative burdens, notably if the tax is levied on ingredients or if the tax base is highly differentiated and complicated.

The study concludes that food taxes in general achieve a reduction in the consumption of the taxed products but that product substitution takes place in particular to:

– “Similar non-taxed or less heavily taxed items”.
– “Cheaper brands of the taxed products, thus potentially not lowering their consumption of the ingredient the tax aims to target (i.e. salt, sugar or fat)”.
– “Other products with similar levels of sugar, salt or fat to those that are taxed”.

The full study can be found here.