What do Latin American governments do when they realize they are spending more money than they have? In part, they raise taxes on the poor in the name of fighting obesity by taxing food and beverages. That’s only the beginning of the ugliness.
It started last year in Mexico, where former New York City Mayor Michael Bloomberg spent a controversial $10 million of his own money to influence the outcome of a proposed tax on sugar-sweetened beverages and high-calorie foods. The billionaire’s own advocacy group now admits that the money was used, in part, to fund scientists to produce research that would support the taxes, according to both the Associated Press and the Bloomberg Philanthropies webpage. This type of outcome-oriented research may get the job done in terms of advancing a political agenda, but it won’t address obesity.
A recent article in the American Journal of Agricultural Economics explains consumer behavior in the face of such taxes. Lead author Chen Zhen explained, “Consumers can simply substitute a taxed high calorie for an untaxed one.” Reduced consumption of certain foods does not necessarily cause a reduction in obesity.
In fact, Bloomberg food police ally Marion Nestle, food policy and nutrition professor at New York University told Politico last month that, “If the taxes are shown to reduce consumption – and I’m hoping studies are under way – I’d say it’s game over.” The taxes will be adopted across the United States even if the Bloomberg-funded Mexican tax has an impact only on consumption, but not obesity.
Now, after enactment last year of a peso-per-liter soda tax in Mexico, the fad is spreading to other nations of Latin America. Chilean president Michelle Bachelet is enacting a soda tax as part of a wider set of measures targeting foods she doesn’t want her citizens to eat. So is Argentina, as it teeters on the brink of its second debt default in 13 years. In Brazil, where officials increased taxes on sodas, beer and energy drinks by 19 percent to 23 percent over the past two years, revenue-starved officials sought a further tax hike timed to bilk thirsty soccer fans from around the world. At the last minute, the World Cup taxes were given a time out until the fall.
Clearly, the science to support these taxes as a serious anti-obesity tool hasn’t yet been established, despite Bloomberg’s millions. So why was the tax adopted?
Rather simply, it is Sutton’s Law. The “law” is named after the infamous American bank robber Willie Sutton, who was incorrectly credited with answering a reporter who asked him why he robs banks by saying, “That’s where the money is.”
According to Christopher Wilson, an associate at the Mexico Institute of the Woodrow Wilson International Center for Scholars, “Traditionally, 30 to 40 percent of the budget came from oil exports, and that has been declining. That has made for a strong imperative to increase tax collection, which is extraordinarily low as a portion of GDP, and that is the driving force behind fiscal reform,” Wilson told the magazine, Governing, in reference to the food and soda tax. Mexicans spend money on high-calorie food and soda, so Willie Sutton would have taxed it, too.
The problem is, taxes on sugar-sweetened beverages and so-called “junk-foods” have a disproportionate impact on the poor. To Bloomberg, whom nobody could accuse of being poor, this isn’t a bug, it’s a feature. Since there’s a high-rate of obesity among lower socio-economic groups, a sin tax that hits poor people the hardest is right on target.
But there’s more to it than money. Even proponents of the taxes concede they aren’t a silver bullet. Throughout Latin America, advocates are pushing a full menu of laws and regulations aimed at soda and food. At the top of the food police wish-list is a restriction on the advertising of foods they don’t want people to eat. Instead of following the science, proponents of advertising restrictions attempt to advance their cause in a way that makes Bloomberg’s attempt to purchase science look honorable by comparison. Activists in Canada, the United States and Chile are suggesting that advertising to kids is akin to molesting children.
Assistant Professor at the University of Ottawa Dr. Yoni Freedhoff says it most delicately, “We need to stop allowing the food industry to target our most vulnerable and precious population, our children.” New York’s Meme Roth, founder of “National Action Against Obesity” is less subtle in evoking thoughts of child molestation by referring to food advertising to children as “predatory” and arguing that we shouldn’t let food company executives have a “relationship with our kids.”
But it took the chairman of the Committee on Health of the Chilean Senate to put innuendo aside and make the allegation Freedhoff and Roth were too polite to directly state. Senator Guido Girardi, told La Nacion that (as translated by Google), “Chile has companies that are the pedophiles of the 21st century, because they abuse children by labeling fatty and sugary food as healthy.”
In their zeal to advance an unpopular agenda, it’s the food police who have become the real creeps. Advocates who want to fight obesity have their hearts in the right place. But that shouldn’t free them from being held to legitimate science and common standards of decency. With a little less emotionally manipulative rhetoric and a bit more nonpartisan science, we could come together and address obesity in a constructive way.
By Jeff Stier
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Shadow health minister Luciana Berger this week ruled out the possibility of a Labour government imposing additional taxes on
fizzy drinks and other high-sugar products.
In an exclusive interview with The Grocer, Berger said the party had decided against backing a sugar tax because it would increase food prices and be seen to punish cash-strapped consumers.
“We have never said we are in favour of a sugar tax and I can categorically say that isn’t the case,” said Berger, who this week hosted an obesity debate in Westminster involving MPs, NHS bosses, NGOs and the food industry.
Campaign group Action on Sugar and the National Obesity Forum have recently supported the idea of taxing products high in sugar. But Berger, whose party is
coming towards the end of a review of its public health policy, cautioned against the approach.
“We should not be looking at any food ingredient in isolation,” she said. “Obviously, we have to do something to tackle the obesity crisis and one of the things that we have to look at is sugar. But there is no specific sugar policy. What we are suggesting is limits on the amount of sugar, salt and fat in food and we will be bringing these forward before the next party conference.”
Berger said Labour was also looking at regulation which could stop fast food restaurants such as McDonald’s being located in close proximity to schools and added that “stores like WHSmith which sell a huge amount of sweet confectionery were also “high on our radar”.
The shadow minister, who has been behind an avalanche of parliamentary questions attacking the closeness of the DH to food companies, would not go as far as confirming Labour planned to scrap the Responsibility Deal but said: “It clearly isn’t working.”
According to the Health Minister Laurette Onkelinx, there is no evidence that taxation has any impact on the consumption of soft drinks. For several months Health Minister Laurette Onkelinx has studied the possibilities of imposing a soda tax in Belgium. With the proceeds of the tax, Onkelix was planning to finance health campaigns targeted at improving people’s diets.
However, after consultation with the food industry Onkelinx has decided that the soda tax is not forthcoming. “We prefer a different approach, which we encourage producers to use less sugar. Because it is proven that a soda tax is not effective, “said Katleen Sottiaux, the spokeswoman Onkelinx in the Flemish newspaper De Tijd.
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Unprecedented move designed to boost jobs and growth
Denmark has announced the abolition of its soft drink tax in a historic move which rolls away legislation that has been in place since the 1930’s.
Removal of the tax, which is set to path the way for jobs and growth, will take place in two stages with a 50% reduction as of 1 July 2013, and full elimination as of 1 January 2014.
A pioneer of soft drinks taxation, with one of the highest excises on soft drinks in Europe, the Danish government made the announcement this week as part of an agreement on initiatives designed to stimulate favourable conditions for growth and employment in Denmark.
“This decision is the result of concerted efforts to highlight the negative impact of the tax,” said Niels Hald, secretary general of the Danish soft drinks association, Bryggeriforeningen. “In taking this step the Danish government acknowledged the regressive nature of the tax, its negative impact on regional jobs close to the borders and the adverse environmental consequences of border trade.”
The announcement on excise tax follows the removal of the fat-tax and the halting of the proposed sugar tax last year and clearly demonstrates that the cost and negative effects of such duties in terms of jobs and economic growth are higher than any expected benefit. The abolition of the excise tax is expected to recoup most of the 5000 jobs lost when Danish people went across the borders to Germany or Sweden for their beverage purchases.
The sound economic policy being followed by Denmark could be a good example to other European countries facing low growth and high unemployment.
Are Ireland on the verge of making the same mistake as Denmark? The imposition, and then subsequent u-turn on the Danish tax on saturated fat has left a gaping €170m hole in the budget, after it was clear that the tax was untenable and harming the economy. So what next for Ireland in the lead-up to the budget? Alison Healy, Food and Farming Correspondent for the Irish Times investigates…
The article reports that the Danish government scrapped its tax because of public criticism over increasing prices, administration costs and concerns that it was putting jobs at risk by encouraging people to cross the border to buy food.
Shane Dempsey, Head of Consumer Foods at Ibec’s Food and Drink Industry Ireland believes that similar things could happen in Ireland.
“Anything that threatens to raise prices and depress demand will cost jobs. And increased unemployment is not a positive contributor to reducing obesity.”
Dempsey also questions whether a more recent proposal by the Department of Health in Ireland recommends increasing excise duty by 10%, (raising prices by 20c per bottle) would have any impact, especially given the price rise would likely be absorbed by the supply chain.
It seems that consumption patterns are shifting away from sugar anyway – low- and no-calorie products have increased by 36%, with regular soft drinks falling by 19%. The sector directly employs over 3,500 people and provides more than 3,000 jobs in indirect employment.
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