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Food tax reality check
When Benjamin Franklin said there are
“only two things certain in life: death
and taxes”, he was spot on. After all,
times were much simpler back then.
Fast forward to 2015 and he might be inclined
to amend it to something like “death and Auckland
University academics coming up with new taxes on
everything we eat and drink”. Because that seems to
form the big part of their contribution to the obesity
debate. No new ideas around education or getting
schools and communities to buy in to programmes
that might lay the foundation to change attitudes
around diet and exercise. Leave that to the
Government, NGOs, and industry. For academics
it’s all about taxes, taxes, taxes.
It wouldn’t be so bad if it could be shown that
taxes worked, but it can’t because they don’t work
anywhere in the world they have been tried, despite
claims to the contrary. In Mexico, the latest to try
a tax on fizzy drinks, official sales figures show
consumption volumes a year later are the same as
before the tax was introduced. All that’s changed is
that the government is collecting more money.
It seems that every other month over the past
couple of years academics have been calling for
taxes on salt, fizzy drinks, sugar generally, and fat –
anywhere between 10% and 20%.
So it’s no surprise that early in July a report by
researchers from the university made another call
for taxes on “unhealthy” foods, although this time
they added subsidies on family necessities like
milk, butter, cereal and bread. They claimed a 20%
subsidy on fruit and vegetables and a 20% tax on
saturated fat and salt could prevent or postpone
thousands of deaths each year.
But the real kicker came in their call for a 20%
tax on major food group contributors to greenhouse
emissions – that is, meat, dairy products such as
milk, cheese and yogurt, plus chicken and even
that popular staple many families love – eggs! They
claimed their “computer ‘macro-simulation’ model”
told them such tax-subsidy scenarios would prevent
or postpone even further deaths.
Unfortunately, such calls are divorced from reality,
and what might look sophisticated and compelling
in this computer model is actually completely
different in real life.
For a start, they are relying on a computer
prediction, while what we do know for a fact is that
slapping taxes on here and subsidies on there is not
going to change eating habits – unless those taxes
are levied at an extremely high rate.
The study assumes that small price changes will
make people eat more of certain products, when we
know that for those who don’t eat enough fruit and
vegetables such changes will not make the slightest
bit of difference. Unless the taxes or the subsidies
are very high then the demand for the affected
products will remain inelastic. That has been proven
around the world.
Seriously, does anyone really believe that
subsidising broccoli by 20% will make people eat
more of it? I think not.
Then there is the reality of what happens in a
market where between 60% and 90% of groceries are
purchased on promotion. A 10% tax here and a 20%
subsidy there will get totally lost in the complex world
of supermarket pricing and regular discounting.
The reality is that if these latest ideas were
to be taken up, fruit and vegetables would be
subsidised, sure, but the cost of around 90% of
the rest of what’s in our shopping trolleys would
jump, including the meat, the dairy and the poultry
which form a vital part of a healthy and balanced
diet. The only beneficiary is the government, which
collects more tax, while no one changes their eating
habits. Based on Nielsen figures for the categories
mentioned, we worked out that the new taxes
would cost families over $1 billion more.
We need to spend our time and money convincing
people through education to eat a balanced diet, not
flogging the same discredited ideas.
NZ Food & Grocery Council
A 10% TAX HERE
AND A 20%
WILL GET TOTALLY
LOST IN THE
42 FMCG BUSINESS - AUGUST 2015
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