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Taxation – an important but complex measure


There are few more divisive issues in the world of food policy than that of taxation. For some people levying taxes on unhealthy or unsustainable products is a draconian measure that demonises certain foods and imposes extra costs on consumers. Others see it as an effective weapon in steering people towards better choices where voluntary measures have so far largely failed.

The evidence to-date on the effectiveness of food taxes is ambiguous. A recent report by Ecorys on food taxes and their impact on competitiveness in the agri-food sector found inconclusive and contradictory evidence that changes in consumption resulting from a food tax lead to public health improvements. Yet with national governments facing increasing calls to use macro-economic governance to reflect the environmental and health cost of producing and consuming food there is little prospect of food taxes dropping off the political agenda any time soon.

But is economic governance really an effective tool in the battle to improve diets? Some countries clearly believe so. Denmark, Finland, Hungary and France are all examples of countries which have introduced new food and drink taxes. Ireland and Italy, meanwhile, have proposed but decided not to follow through with taxes of their own.

In Hungary, a tax was primarily levied on sugary drinks and foods, some alcoholic drinks, and energy drinks with the dual aims of changing consumption and production patterns and raising funds to pay for public health costs associated with poor diets. According to a study carried out by the Hungarian government supported by the WHO, 30% of Hungarian consumers had changed their consumption patterns due to the tax’s introduction with approximately 80% of this change due to the price change and the remainder due to increased awareness and other factors.

On the surface the results look extremely promising; however our relationship with food is complex and it’s vital that fiscal stimuli do not create unintended, and undesirable, outcomes. In France, for example, a soft drinks tax lead to an increase in consumption of salted crisps, possibly as consumers sought alternative sources of unhealthy “treats”.

In Europe, the countries that have trialled food taxes are the exception rather than the norm and the orthodox position remains that information, rather than compulsion, is the most desirable way of changing consumer behaviour. In practice this tends to mean a focus on ‘soft’ policies such as clearer, more comprehensive labelling and health education campaigns over ‘hard’ fiscal measures such as taxation. Yet, to-date, soft policies have failed to deliver the dietary shifts required to reverse the mounting environmental and health costs of poor diets.

As global obesity rates continue to rise, and in turn the cost to health services of treating obesity-related diseases soars, taxation is likely to become an increasingly attractive option to policy makers. The challenge for governments will be in determining where and how to levy taxes and how to measure their impact. Nutrient profiling is notoriously difficult and inevitably results in foods that can be nutritionally important as part of a balanced diet being penalised. Cheddar cheese, for instance, has a high fat and salt content but is also high in calcium which is important for bone health. The example of France, meanwhile, shows that the impact tax has on demand for a given product should not obscure its broader impact on dietary habits.

Taxation is likely to have an important role to play in delivering a healthy, sustainable future food system. But such a powerful tool needs to be handled with care to prevent unforeseen damage being wrought.

* A version of this blog was published on the Live Well for Life website:

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