Fat tax implications

The rising prevalence of overweight and obesity has compelled policymakers to consider health-related taxes in order to reduce the intake of unhealthy foods and drinks (Laura Cornelsen, 2015). It is estimated that 39 percent of adults worldwide are overweight, which is bad for the economy. Obesity and the implications for body weight are among the most serious issues confronting the world’s health-care programs. Obesity is a major risk factor for heart disease, asthma, and premature death (Cawley, 2012). As a result, in reaction to increasingly rising obesity, many policymakers are desperate for effective measures to address the chronic problem. The difference between the energy intake and expenditure has widened since 1970 (World Health Organization, 2003). A fat tax is a surcharge which is placed upon fattening foods, drinks, beverages or on obese individuals (Laura Cornelsen, 2015). A fat tax is an economic incentive which encourages manufacturers to reduce the production of food with high calories. The idea behind the tax is also to enable the government to subsidize healthy foods to make them more affordable and make unhealthy foods comparatively expensive.Though these taxes are feasible efficient in reducing by a small amount of targeted product if the tax is fully transmitted to the buyer, there is little evidence on what will be consumed instead and whether these food substitutions will undermine the hoped-for health benefits of the tax. Therefore, the fat tax is not an efficient solution since it does not curb obesity in the world.

Nonetheless, a fat tax is advantageous in that is raises revenue in which the government can use to finance another measure that can be used to combat obesity such as education programs or subsidizing exercise equipment (Cawley, 2012). On the contrary, the law of demand dictates that there is an inverse relationship between the price of a good and demand of the good. Therefore, meaning that the higher, the higher the price, the less the consumption and the lower the price, the greater the use. Nonetheless, it does not apply to most products including foods since the responsiveness of the demand for food to changes in prices is relatively small (Mytton, 2012). Hence the request for food is inelastic. Thus research has revealed that taxes on food would need to be at least 20% to have a meaningful impact on health. Hence the tax cannot be economically feasible (Mytton, 2012). In developed countries, the approachability of consumption to changes in prices of food is relatively small since food only compromises on a small portion of total household income (Gao, 2011). Thus imposing a fat tax, won’t affect the consumerism of the fatty foods among the rich and middle class in developed nation. However, the imposition of the fat tax will be more sensitive to the low-income population who spend relatively more on foods in comparison to wealthier households. Lower income consumers spend a greater proportion of their income on non-alcoholic beverages and food than more affluent and high-income households (Gao, 2011). Therefore fat tax will become unfair by making goods more costly to the lower income households and disproportionately hit the living standards of the lower income families.

Another reason against the Imposition of the fat tax is the fact that the tax will not necessarily go to change the consumption pattern of the consumer. According to social sciences, it is naïve to believe that one can change behavior using taxes and raise revenue spontaneously (World Health Organization, 2003). It is hard to achieve both goals of increasing income from fatty foods and also expects achievement of behavioral change regarding consumerism pattern among people. For example, the implementation of the tax in Denmark was plagued by problems. People in Denmark started bypassing it by buying across the border which was cheaper and easily accessible. Therefore, most of the consumers did not want to change their diet because their costs increased hence resorted to finding the same products but at a cheaper and acceptable cost. Hence adding fat tax was an inefficient method of discouraging consumerism of the products (World Health Organization, 2003).

One of the greatest challenges of the implementation of the fat tax is the effect of the tax on the food and beverage industry (World Health Organization, 2003). The response of the manufacturers and the retailers to the introduction of the tax may be negative hence affecting the production and sales of the products that have a fat tax. Therefore, implementation of the fat tax is dependent on the manufacturers who will in turn increase costs of their products and the consumer will likely be affected by the increased prices (World Health Organization, 2003). Statistics reveal that a third of European believed that it is not easy for them to eat a healthy diet since affordability of goods that are necessary for a healthy diet is a critical challenge (World Health Organization, 2003). Thus financial constraints have a significant role in limiting healthy eating and imposing the fat tax is likely to affect the lower income groups negatively.

Fat tax can also be advantageous since it can play a role in reducing the economic cost of obesity. Obesity has serious health consequences which in turn has real economic costs of treating the lifestyle diseases cause by obesity. There is an estimation that annual health care costs of obesity-related illness are a shockingly 190.2 billion dollars or approximately 21% of the annual medical spending in the United States (Cawley, 2012). The direct and indirect costs of obesity stifling businesses and organizations which stimulate jobs and growth of cities in the United States. The nation also incurs on higher costs of disability and unemployment benefits which are attributed to obesity. Business is also suffering due to obesity-related job absenteeism, and hence the cost of obesity continue to rise in the United. Though fat tax won’t is the most efficient method of reducing the obesity rate in the United States, it can still be used as means of curbing the rate of obesity in the country. On the contrary, a fat tax is majorly based on assumptions of people’s lifestyle hence against the imposition of the fat tax. The proposals to tax food and drinks that are less healthy are based on the hypothesis that obesity is only caused by taking less healthy foods. Over the years, the lifestyles of people have changed therefore many individuals are becoming inactive because of the influence of technology. People’s lifestyle choices have impacted their outcome of their health in this world. Therefore, fighting and reducing of obesity in a nation depends on a lot of the current motivation by people lose weight or avoid obesity and unhealthy lifestyle rather than the imposition of a tax on the people by the government.

There has also been an issue raised by public health advocates who question the impact of the fat tax which only targets multinational companies such as Mc Donalds, Burger King, Pizza Hut and Dominos while it excludes traditional foods (Laura Cornelsen, 2015). Therefore, the introduction of the taxation becomes biased since it is only one sided hence reducing the impacts it will have on the people in reducing intake of unhealthy food (Laura Cornelsen, 2015). For example, in India, hawkers who sell deep fried vada pav, pakoras and samosas along the streets are not affected by the taxation system are one of the most consumed fatty products. Therefore, the fat tax will have minimum impacts on the traders and consumers of such fatty foods thus not achieving its purpose in the first place.

It is better to offer alternative anti-obesity measures which separate revenue raising and public health, only emphasizing on the promotion of sound habits such as promoting exercising. Thus the government should resort to find creative solutions to curb obesity rates in the world. A more innovative and useful solution to control the obesity pandemic would be to increase subsidies to the production of fruits and vegetables that contribute necessary nutrients for a balanced lifestyle.

References

Cawley, J. a. (2012). The medical care costs of obesity: an instrumental variables approach. Amsterdam: Elsevier.

Gao, G. (2011). World food demand. London: Oxford University Press.

Laura Cornelsen, R. G. (2015). Why fat taxes won’t make us thin. London: J Public Health (Oxf).

Mytton, O. T. (2012). Taxing unhealthy food and drinks to improve health. London: BMJ.

World Health Organization. (2003, February 1). World Health Organization, Food and Agricultural Organization. Retrieved from Diet, nutrition and the prevention of chronic diseases: http://whqlibdoc.who.int/trs/WHO_TRS_916.pdf.