Taxing groceries is not the solution

Jeff Rogut
January 2012

“Michael Keane, an adjunct lecturer in public health at Monash University and an adjunct associate professor at Swinburne University, warned against what he called the established ideology in public health.

“I would be concerned by the potential focus on bureaucratic edict and prohibition,” Dr Keane said. “An attempt should be made to engage the widespread community concern at the lack of personal responsibility that appears to dominate contemporary public health thought.

“As a matter of urgency, further research grants should be targeted to investigate what effect the public-health-promoted mass abrogation of personal responsibility is having on the equilibrium of forces which affect behaviour and the effect that this potentially has on the fabric of our society.”” The Australian Monday 21st January 2012

Food and beverage manufacturers and retailers do understand that obesity is a serious issue and everyone has a role to play as part of the solution.

Taxing groceries such as soft drinks as was proposed in the media last week will not ensure that Australians are healthier, nor will it lower the rate of obesity in this country. There is no one single cause for obesity and no one solution. Consumer education and more product choices and incentives to become healthier would lead to more effective results than a discriminatory grocery tax.

As an example, grocery taxes have been tried in 18 states in the U.S. and have not been proven to work; in fact, there is little to no evidence that taxing groceries results in people making healthier food choices. A recent analysis in the U.S. concluded that in order to reverse the obesity rate, Congress would need to impose a 1,200 per cent tax on beverages, for example; this would represent $9 of tax on a 75 cent canned beverage.

The comment from the US First lady, Michelle Obama is insightful. When asked about a “fat tax” on NBC she said: “I think folks need information. You know, knowledge is power. And, you know, we’re lacking that. I mean, people eat what they eat because they think it’s OK. They don’t need government telling them what to do. They just need good information and access.”

A grocery tax is a selective tax that only creates complexity for consumers and for business. It is a regressive tax. Low-income families in particular are hurt by taxes on groceries because this segment of the population spends a greater portion of their income on food and drink than do high-income consumers.

In reviewing policy related to childhood obesity, the Government of Australia concluded grocery taxes are at best insignificant in reducing obesity but do run a significant risk of harming low income families who have to spend a higher percentage of their income on food and beverages. http://www.pc.gov.au/research/staffworkingpaper/childhood-obesity
Last October, the Government of Denmark introduced a tax on fat but has now retreated from it.

Reducing obesity is complex and everyone has a role to play in contributing solutions

There is no one cause and no one solution for obesity. To imply that grocery taxes, or selective taxes as deemed by ‘experts’ are a simple solution is to imply that obesity is a simple problem. More comprehensive programs are needed that address the many factors contributing to obesity.

Education is a key to reducing obesity. Governments should be focusing on assisting in education rather than demonizing grocery products through a selective tax scheme.

Our industry stands ready to work with governments and other partners to develop programs that do provide education and to allow consumers to make informed choices.

“Governments can employ a range of policy tools including price instruments (such as taxes or subsidies), helping consumers be better informed (education and information), and regulatory measures that influence consumer or producer choices.
Ideally, policies should directly target the source of the problem — for example, information ‘failures’ and behavioural limitations might warrant ‘softer’ style interventions, such as information provision and education. Given that obesity occurs more in some groups of the population than others, such as those in lower socioeconomic groups, there are also important population targeting considerations.
Moreover, the complex, multifaceted causes of obesity — which are yet to be fully understood — suggest that effective policy solutions are likely to involve a mix of tools acting on a range of levels (such as child, family and school, and energy in, energy out). But these tools should be targeted carefully at the causes of obesity and focus on improving individual decision-making over the longer term. Measures that constrain behaviour indiscriminately are rarely effective, equitable, or improve community wellbeing. Bans or taxes on particular energy-dense nutrient-poor foods, for example, face design difficulties, affect all consumers regardless of their weight status, and in the case of taxes, can have perverse budgetary and health effects particularly for the neediest groups.” Source: “Childhood Obesity: An Economic Perspective” – Australian Productivity Report September 2010

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