A new report based on real-world examples by the prestigious UK-based think tank Institute for Economic Affairs demonstrates that sugar taxes are ineffective, regressive and inefficient.
The main findings confirm what many other studies have already shown, in particular:
- The demand for sugary drinks, snacks and fatty foods is inelastic: evidence demonstrates that most people will not change their food shopping habits unless prices change dramatically
- Consumers respond by substituting taxed food and drinks with cheaper brands of the same products or with similar non-taxed products. This behaviour leads to the consumption of potentially inferior goods rather than the consumption of fewer calories
- Consumers tend to switch from taxed sugary drinks to other high calorie drinks such as fruit juice, milk or alcohol
- Food taxes are highly regressive and severely hit low income households because energy-dense food and soft drinks take a greater share of their earnings than that of higher income households
- Most notably, no impact on health has ever been found
Asked to comment on the report, Chris Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs, said that the effectiveness of sugar taxes as health measures lack “any real world evidence”.
“It’s high time this policy [taxing sugar] is put to bed” – he concluded.
On 5 February 2015, the European Commission initiated a formal investigation procedure against Denmark’s so-called ‘fat tax’, which was introduced in 2011 and abolished in January 2013: the European Commission suspects it could be considered as illegal state aid.
The goal of the investigation would be to determine whether food producers who were not forced to add an extra fat tax on their products received illegal assistance.
The tax was levied on meat, dairies, oils and other foods with at least 2.3% of satured fat. The Commission argues that all products with saturated fats should have had the fat tax added.
When abolishing the tax, the government put forward it had created administrative burdens it created, a dramatic rise in border trade and uncertainty among consumers on the real costs of food products.
A full article from Euractiv on the investigation can be read here.
Recent reports by French senators Yves Daudigny and Catherine Deroche and by Professor Serge Hercberg highlight the public health problems (cardiovascular disease, diabetes and cancer) linked to expanding waistlines. The Hercberg report also notes that, since France’s National Nutrition and Health Programme was launched in 2000, it has not halted rises in excess weight, diabetes or hypertension. The solutions suggested in both reports are based on three lines of analysis: (a) the social cost of excess weight; (b) irrational behaviour by consumers; and, to a lesser degree, (c) social inequalities in health. Instituting new taxes on foods targeted for lower consumption would be the main remedy. Subsidies (financed by these levies) for healthful foods would provide new incentives to encourage their consumption. Nevertheless, both reports note that poor nutrition and its consequences are a complex problem that calls for an entire set of solutions, though they mostly favour tax measures. These are not a panacea, however: their effects on changes in dietary habits are often uncertain, making it hard to pursue the stated goals.
The impact of taxes in reducing the consumption of nutritionally poor foods is uncertain.
While the goals may be laudable (though this is questionable), there is a major risk of applying additional constraints on economic activity without getting the expected public health benefits (in particular, improved results from France’s National Nutrition and Health Program) while nurturing a dynamic of government interventionism that is making French society more sclerotic. Experts and public authorities tend to depict a black‐and‐white situation, whereas reality is far more complex. Excess weight and the pathologies it leads to are a relatively recent problem in the history of humankind. We still lack the full knowledge that could guarantee an adequate solution.
Although nutrition taxes may appear to provide a response, it is important to understand their limits, especially in terms of a rational approach to avoidance, because the economic costs of these taxes are high in the long run. We should not delude ourselves. In this time of strained public finances, an ulterior motive in the renewed interest in this type of levy is to generate more tax receipts. There are many precedents. President Franklin D. Roosevelt ended the prohibition of alcohol in the United States to boost tax revenues. Due to the Great Depression, Congress had an urgent need for financing, and the best way to get it was to institute taxes on alcohol.
It is always preferable to change the context in which individuals make decisions so that they internalise the externalities they create. In this regard, obesity imposes few or no externalities if individuals bear its costs. We must therefore make sure that incentives for reducing obe‐
sity are in place. Nutrition taxes, by imposing the theoretical frame work of caloric imbalance, would limit the emergence of new ideas that could help reduce excess weight. In the end, we need to show a degree of humility toward the social and biological process. Western society, open and based on free enterprise, dates back only to the late 18th century. It is possible that the human body, after many thousands of years of survival in penury, has not yet adjusted to the abundance generated by capitalism.
To read the full report, please follow this link http://www.institutmolinari.org/IMG/pdf/note0314_en.pdf
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
The spokesman of the German Federal Ministry of Food and Agriculture mentioned in an article in Die Welt that: “Using punitive food and drinks taxes which generate political control of consumption and patronize the consumer, should be rejected.”
Penalty taxes for supposedly unhealthy foods usually bring no change to the diets of individuals. The Ministry highlighted that: “In November 2012, the Danish Government abolished the fat tax which had been introduced a year earlier on the grounds that the tax did not change dietary behaviour.”
Zucker-Fett-Steuer soll Fettleibigkeit eindämmen
Das Bundesministerium für Ernährung und Landwirtschaft wiegelt ab: “Eine politische Steuerung des Konsums und Bevormundung der Verbraucher durch Strafsteuern lehnt das Ministerium ab”, teilte ein Sprecher mit.
Strafsteuern für vermeintlich ungesunde Lebensmittel änderten in der Regel nichts am Ernährungsverhalten der Menschen: “So hat beispielsweise die dänische Regierung im November 2012 ihre ein Jahr zuvor eingeführte Fettsteuer wieder abgeschafft, mit der Begründung, die Steuer habe das Ernährungsverhalten nicht verändert.”
Please see the article here: http://www.welt.de/gesundheit/article128257815/Zucker-Fett-Steuer-soll-Fettleibigkeit-eindaemmen.html