Taxation is ineffective

Discriminatory taxation is ineffective in controlling obesity and changing consumer behaviour

Taxation is ineffective

Taxes against certain food-types are ill-conceived and will not curb obesity or the prevalence of non-communicable diseases. Taxation is a blunt tool against a complex set of causes and behaviour.

It’s not that simple – NCDs have many causes

Obesity and other nutrition-related non-communicable diseases (NCDs) have many causes – including bad diet, lack of exercise, sedentary lifestyles and genetics – and require a coordinated approach. Calories come from everything we eat and drink so to attribute the sugar contribution from soft drinks to obesity is virtually impossible given the many other sources of sugar that make a greater contribution in the diet.

Consumer behaviour is complex

There is no simple relationship between patterns of consumption and price, so discriminating against certain foods with a simplistic tool such as tax fails to recognize the complexities of consumer purchasing patterns.

Taxation is based on assumptions

Proposals to tax less-healthy products incorporate two assumptions: the tax will be translated directly into price increases, and consumers will recognise the rise. With soft drinks, both are unlikely:

  • The pricing of soft drinks is extremely complex. Both nominal shelf prices and continuous price promotions vary between outlets, regions and seasons, even between supermarkets.
  • Discounts in the retail outlet mean that tax can be easily absorbed or concealed. As a result, it is difficult for consumers to determine the ‘normal’ price.

How consumer behaviour changes in light of relative price changes is thus not always obvious, which makes it very difficult to model and predict a decrease of consumption in a robust manner.

Moreover, consumers with a preference towards a particular product or brand are likely to be resistant to the price or to seek to purchase the item in a location where the price is lower. Taxes that increase price differentials between the same product sold in neighbouring countries or between neighbouring states/tax jurisdictions within the same country, would promote trans-border purchasing.

In addition, consumers may either buy in bulk or switch to lower-priced brands which will nevertheless offer similar characteristics in terms of taste, calories, sugar content etc.

Find below a selection of relevant studies and media articles on the inefficacy of taxation on controlling obesity and changing consumer behaviour: