Introduction: Fat Tax

  • A fat tax is a tax or surcharge that is placed upon fattening food, beverages or on overweight individuals.
  • It is considered an example of Pigovian taxation.
  • A fat tax aims to decrease the consumption of foods that are linked to obesity and thus offset the economic costs of obesity
  • An estimate suggests that a 1 cent per ounce tax on sugar-sweetened beverages may reduce the consumption of those beverages by 25%.
  • Kerala is the first state in India to introduce a "fat tax" on burgers, pizzas, doughnuts, and tacos served in branded restaurants.
  • Denmark introduced a fat tax in 2011 but ended up repealing it in 2013 when it found consumers shopping across the border for high-fat foods.
  • Mexico applies fat tax on sugary drinks, breakfast cereals, and sweets.
  • Hungary applies fat tax on foods high in sugar, salt and fat.
  • In the US, battles are being fought over taxes on sugary drinks.
  • Philadelphia became the first major city in the US to introduce a soda tax.
  • Slow the rise in obesity- Evidence suggests that a 20% tax placed on sugar-sweetened drinks could lower obesity rates by as much as 3.5%.
  • Used as subsidies for healthy foods- Using the revenues from a fat tax to subsidize healthier foods can make it easier for everyone to access what they need for a healthier lifestyle.
  • This will help in increasing India’s public spending on health, which is just 16% of the GDP now.
  • Improve personal productivity- Those who are obese are 25% less likely to be in employment, leading to lower tax revenue and higher welfare spending on benefits.By reducing the trend on obesity, people can have more energy. They can have a healthier immune system. This allows them to be more productive.
  • Cheap and effective- Taxes on items that encourage weight gain is the least costly method there is to reduce the consumption of these foods. The higher price of the product immediately discourages its consumption.
  • Quick Implementation- It can be implemented quickly and results can be seen within weeks. An effective fat tax can reduce the average person’s kcal consumption by up to 150 per day.
Disadvantages of a Fat Tax
  • Regressive- The tax hits households who are poor the most. Those who are poor are unable to purchase costly healthy foods, so they rely on foods that could be included in a fat tax. Since households that are poor typically spend up to 30% of their total income on food, they would be hit in two ways by this process. They’d still be unable to afford healthier foods and they’d be forced to pay more for the food they can afford.
  • Can end up taxing healthy foods- Some high-fat foods, such as nuts, avocados, and salmon, are known to reduce the risk of heart disease and can even lower a person’s blood pressure. A difference between saturated and unsaturated fats must be included in the policy for the tax to be effective.
  • No guarantee that eating patterns will shift- A fat tax can shift a consumer’s food choices away from specific foods because they cost more, but that doesn’t guarantee a result. Consumers could just shift to unhealthy food choices that fall outside the taxation brackets.
  • The focus of the fat tax can be lost.- Policymakers tend to shift their perspective from reducing sugar and unhealthy fat consumption to the amount of revenues that are being generated by the tax.
  • It raises product costs- When the city of Seattle adopted a fat tax in 2017, the price on the average 12-pack of soda, at $4.50 retail, rose to $7.02. Higher product costs encourage similar products to raise their own prices, even if they are not part of the tax. That means everyone ends up paying more for everything, but the businesses and the government gets the bulk of the profits.
  • We see change in food habits and dietary charts as the global order changes For example the consumption of pulses have rapidly fallen in India.
  • Yet it is important to keep reinventing the food basket so that at any point it offers a healthy group of choices for the consumer.
  • The tax should be seen as a move toward this direction.
  • It must not be used and seen as a tool to earn revenue or rapidly shift consumer consumption patterns but as an indicator that seeks to check and balance our dietary behavior to stop it from reaching dangerous levels.
https://en.wikipedia.org/wiki/Fat_tax https://www.bbc.com/news/world-asia-india-36771843 https://thediplomat.com/2016/08/indias-fat-tax-debate/ Read More Articles: A case for a differential global carbon tax Goods And Service Tax: 2 Years Journey