Social Desirability and Effectiveness of a Fat Tax - Essay Example

1. INTRODUCTION THESIS: This paper asserts that fat tax yields unintended consequences by impacting consumers differently in reference to regression effect, and there are challenges in altering consumer dietary behavior. Fat tax alone is an insufficient measure to solve the problem of obesity in any country; it would require combined policies and regulations by different responsible parties to alleviate the health problem. 2. PROBLEM IN DEFINING THE TAXABLE JUNK AND UNHEALTHY CATEGORIES OF FOOD 3. RARELY WOULD A FAT TAX ALONE SOLVE OBESITY 4. FAT TAXES ARE REGRESSIVE 5. EVALUATING THE EFFECTIVENESS OF FAT TAX 6. CONCLUSION Introduction The problem of obesity is a public health concern worldwide. It had initially been associated with the developed western nations, but research shows that more people in the developing countries are being diagnosed with cardiovascular and obesity related diseases. Food labeling measures have been implemented for years, but despite such policies being in place, people in these nations continue to grow obese. Recently, most governments, especially in America, Europe and parts of Asia have or are considering implementing high tax policies on junk food. Experiences show that food tax policies are withdrawn later for their unintended consequences, with only few exceptions of countries like Finland that seem to progress well with such policies. Thesis: This paper asserts that fat tax yields unintended consequences by impacting consumers differently in reference to regression effect, and there are challenges in altering consumer dietary behavior. Fat tax alone is an insufficient measure to solve the problem of obesity in any country; it would require combined policies and regulations by different responsible parties to alleviate the health problem. Problem in Defining the Taxable Junk and Unhealthy Categories of Food Each government has individually selected which food categories to impose tax on. Some focus on levying high sugar foods, while others focus on fat saturation or the cholesterol content. These are some of the ways used to evaluate taxable junk food. However, defining junk food is complicated for the reason that it extends even into the healthy food types. First, not every meal that is served at the table even in sizable proportions is healthy or has the right nutritional value. Researchers classify vegetables and fruits among the recommended food types, others extend to healthy fatty acids which can be challenged when high fat content is considered, but place a bias on the served fast foods at most outlets, targeting those prepared or manufactured with high sugar, salt, fat, cholesterol and fat saturated or low vitamins contents. Others define unhealthy foods as a combination of the latter category, but criticized to be rather harsh on the consumer. Such complexities make governments select a single measure of the unhealthy food to impose junk food tax. For example, Hungary junk food tax concentrated on excessively sugary, salty and high caffeine levels, Denmark on foods highly saturated in fat, and majority others are focusing on high calorie food after monitoring its successful trend in Finland.1 It is not easy for the policymakers to draw the line on which foods to tax; as a matter of fact, food and nutrition specialists need to be involved than ever to assist in development of such policies, by determining unhealthy food categories, but also potential harmful nutritional contents and food ration. There many factors that ought to be considered, such as affordability and food security before drawing the line. With more food types under the unhealthy category list, more unintended consequences occur, because more of the regarded healthy food category is subjected to the tax legislation unconsciously. Similarly, companies that use the highly taxed nutritional content would translate those costs to the end consumer even if it is in the healthy classified food. Food manufactures and outlets find food (fat, sugary, etc) tax rather unconvincing in controlling obesity. Though they have to comply with the regulations, their adjustment is not sufficient. They are in business and need to survive the competition in the midst of the government policies. What most do is reduce the portion of food being served or in a package. The recent McDonald’s fast-food litigation exposed how the food industry is willing to go round the policy for business existence. Though much pledges in reducing fat and calories in food by McDonalds, what followed were much appealing advertisements on the media, offering lower fat and calorie foods in their menu, while Kraft Company entailed reducing snack marketing in schools and reducing the food portion.2 Some still offer the same classified unhealthy products but recommend consumers to regulated consumptions. It is almost similar to ‘excessive smoking can affect your health’, but conceals the communication under tender words to ensure their products are still marketable. Rarely would a Fat Tax alone solve Obesity Fat tax is a step towards solving the problem obesity for most nations, but it is also reasonable to state that alone it does not stand a chance to succeed unless combined policies and regulations come into force. It looks like an illusion, while in reality, produces the modest effects on obesity in the larger population. Let alone the taxation policy, consumers have in the past given poor results even after policies that enhance information availability on food types came into effect. Most countries have regulations that require nutrition labeling of food products to guide consumers make healthy choices. Such policies have been in existence for long, but there is an increasing trend of an overweight and obese generation. Fat tax alone has been a failure. In fact, critics point out that some labeling formats only generate confusion, require high level of understanding to interpret scientific terms and nutrient quantities listed, while only a smaller sub-set of the population cautious in diet and health reads the labels to compare the products.3 Everyone has interest in their health and diet, but only a few take the time to read labels and fully understand the implications of the food contents. Fat tax on the other hand is a transposed policy designed to engage consumer action by affecting their finances. Numerous indicators in the economies have already given a poor impression of fat taxes. First, the societies’ attitude and behavior demonstrate that people are willing to navigate through, access optional products to fulfill their satisfaction. Just consider why most countries like Denmark or states like Maryland and California had to reverse the policy later. As a country imposes fat taxes, what would prevent people from taking more sweetened sugary beverages? Similarly, if only one country imposes the tax while its neighboring nations fail to, production in the country of the fatty food would decline, but it does not imply that people will stop consuming; in any case, these taxable food types can be produced and imported at a cheaper price from across the border. Obesity is not only caused by fatty food; sugary beverages and uncontrolled consumption of other alternative foods could produce the same effect. For example, lack of physical exercises for consumers who take large portions of healthy food, could result to overweight complications among other health risks. When recommended calories per meal are exaggerated by intake of large food portions, the net effect could be what the governments are trying hard to escape through fat tax policy. The strategy that should be taken to realize progressive and healthier results is bringing in the broad food taxes and implementing them with other non-financial policies in the society. Recent studies investigating the practicality of fat tax on foods alone in the UK, “revealed that it would be of limited success to solving the obesity problem; the findings on the studied households showed a greater uptake of cheaper healthy eating options.”4 Combating obesity requires integrated efforts and responsibilities from all parties concerned (the government, food production industries, agricultural sectors, learning institutions and consumers). There is just no simple solution to the obesity crisis in modern economies other than a package of interventions with efficient monitoring and evaluation.5 Governments controlling obesity levels through high taxation should not only focus on fats, but sugary beverages, subsidies for healthy food alternatives, sufficient labeling of food products, high penalties on food industries (e.g. confectionaries and fast food producers), for lack of adherence to food standards and regulations for farm chemical use among other policies. Other than fiscal policies, the government though NGOs and education system can enhance health and dietary knowledge through disease awareness campaigns, to enforce the need nutritional and healthy diets and assist people understand the need for food labeling and how it could help them. Governments can also ban advertisement of fatty, sugary and energy dense food from the media, introduce healthy meal programs in schools and encourage nutritional homemade meals among other community based initiatives focused on promoting healthy lifestyles. This shows that reduction of the obesity problem has to be an initiative from individuals, families, institutions, food industries, government and ultimately the general society to motivate changed nutrition, dietary and lifestyle behaviors among people. Fat Taxes are Regressive There are two distinctive outcomes when fat taxes are applied in a nation; first, the government would raise substantial amount of revenue and second, the tax burden would impact on the social economic groups differently. Governments that had previously implemented any kind of food taxes can testify that huge sums of revenue were generated through the policy. However, some may argue over its effectiveness based on how the government spent or distributed the finances. Some governments would use the revenue to offset other taxes, hence allowing certain healthy food subsidies or lowering healthcare and medication costs among other activities that would promote health. Practically, there seems to be a tradeoff between raising revenue and increasing the tax burden on the low income earners through fat tax policies. In the broad sense, high food tax would affect the low income earners than the high incomers, because they tend spend a larger share of their limited earning on food needs, specifically on unhealthy cheaper foods, which make the policy unattractive for the induced regression.6 Since the fatty foods being taxed are the mere basic products they use on a daily basis, regression could be extreme on the poor group of the society. Based on the grounds of distributive justice, the policy targets on the low income families than wealthy households, because they are the majority consumers of the junk and unhealthy fatty foods being highly taxed; hence translating the high tax burden to the poor. The government would be financially benefiting at the expense of high taxes on low-income majority consumers. Some researchers argue that no matter how fat tax is implemented, regressivity would hold to cost the poor more than the wealthy group. It was an experience in Denmark, which forced people to seek other cheaper alternatives. Even though it managed to raise revenue in the single year it was functional, it led to unexpected outcomes; the less well-off opted for cheaper products that lacked nutritional value. 7 Evaluating the Effectiveness of Fat Tax Different junk food consumers would respond differently to the taxation policy. It must be appreciated that this would vary across the various demographic groups. While some consumers are sensitive to the price changes, others would take a subset of integrated policies to alter their consumption behavior. For some groups of consumers, large price increases for the junk food do not induce any significant change in their consumption pattern. The rich may not even feel the pinch of the high prices, meaning their expensive and unhealthy eating behavior would continue. Others in the population would resort to the alternative of consuming more of other food types, and especially if they contain the preference flavors. Only the few sensitive to price changes and health concerns would adjust to recommended nutrition and eating habits. Taking an example of Denmark’s consumer response on fat tax adopted in 2011, it can be realized that the extent citizens are willing to go to maintain their lifestyles; besides the Danish critics to the policy, some even crossed to Germany and Sweden borders to purchase and stock up the highly taxed cheaper fast foods in their own country. 8 Numerous countries and states have adopted taxation policies on junk foods, but ended up abandoning them in the short term. Practically, high taxation on fatty and junk foods in most nations have failed to the economic theory that it motivates consumer spending on healthy food alternatives. Investigations through economic models conclude that health - related food tax models (subsidies on healthy foods and drinks and high taxes on fatty and sugary foods) are potential tools to change dietary behaviors.9 In theory, price elasticity influences consumer demand and since tax rates are well linked to the consumer prices, fat taxation is expected to increase junk food prices so that consumers can spend their limited income on healthy diets. To promote good health and consumption pattern, consumers are given the other food and drinks alternative that are encouraged using tax subsidies. Governments lower taxes for food industries that produce or prepare low-fat content food, healthy and nutritious meals in substitution of unhealthy fatty diets. However, the cross price elasticity’s of demand that could result to negative health effects and unpredicted consumer behavior with the high degree of interdependence in food consumption cannot be ignored. Taxation of fatty food is obviously towards obtaining general wellbeing of the society. Though theoretically proven to be effective, its application has been accompanied by numerous critics on failure to be effective and other side effects in terms of prices. However, that may not necessarily work and most countries have experienced only integrated interventions ranging from fatty food taxation, subsidies, enhanced awareness, and labeling could assist consumers’ reduction of weight and ultimately reduce risks of obesity. Fatty tax could not necessarily translate to nutritional benefit alone. For example, if a country increases tax on fat saturated foods, but makes no changes on other food intakes, an individual could compensate with the sugary-sweetened beverages or highly salted foods, which are not nutritious. Others could result to un-proportionally high energy food intakes, lacking sufficient nutritional balance for satisfaction. Conclusion Fat tax policy is a step in the war against obesity, but alone, it has proved to a failure and accompanied by numerous critics upon its application. Canada needs to assess the reality of the policy and not just be swayed by the attractive theoretical assumptions. Policy makers need to clearly identify what they refer to as junk food and make recommendations for the society. They also have to consider the price implications of healthy foods upon taxation of the categorized unhealthy food, having in mind the income distribution of its socio-economic classes in the population. It needs to evaluate which combination policies can be effective together with the fat tax, rather than venturing into the obesity war with a single food tax alone. Bibliography Alemanno, Alberto and Carreño, Ignacio. “‘Fat taxes’ in Europe: A Legal and Policy Analysis under EU and WTO Law.” gastronomiaycia.com. Accessed 21 March 2014 http://www.gastronomiaycia.com/wpcontent/uploads/2012/09/Impuesto_Grasa_Europa.pdf Freshfields Bruckhaus Deringer LLP. “Food Safety Update.” lexology.com. Last modified Spring 2011. http://www.lexology.com/library/detail.aspx?g=b2052b31-4d17-4afe-8628-911772838089 Hawkes, Corinna. “Nutrition Labels and Health Claims: The global Regulatory Environment.” Who.int. Last modified 2012. http://whqlibdoc.who.int/publications/2004/9241591714.pdf, p.8 Jensen, Jørgen Dejgård and Smed, Sinne. “The Danish Tax on Saturated Fat –Short Run Effects on Consumption and Consumer Prices of Fats.” okonomi.foi.dk. Last modified 2012. http://okonomi.foi.dk/workingpapers/WPpdf/WP2012/WP_2012_14_Danish_fat_tax.pdf, p.2 Leicester, Andrew and Windmeijer, Frank. “The fat Tax: Economic incentive to Reduce Obesity.” The Institute for Fiscal Studies, no. 49. Accessed 21 March 2014 http://www.ifs.org.uk/bns/bn49.pdf. Mello, Michelle M., Rimm, Eric B., and Studdert David M. “The McLawsuit: The Fast-Food Industry and Legal Accountability For Obesity.” Health Affairs, 22 no. 6 (November 2003): 207-216. http://content.healthaffairs.org/content/22/6/207.full National Preventative Health Task Force. “Australia: The Healthiest Country by 2020.” preventativehealth.org.au. Last Modified 2009, http://www.preventativehealth.org.au/internet/preventativehealth/publishing.nsf/Content/E233F8695823F16CCA2574DD00818E64/$File/obesity-jul09.pdf. Sacks, Gary. “Denmack Scraps Fat Tax in Another Big Food Victory.” theconversation.com. Last modified17 November 2012. https://theconversation.com/denmark-scraps-fat-tax-in-another-big-food-victory-10689 Sifferlin, Alexandra. “Study: A 20% ‘Fat Tax’ Would Improve Public Health.” time.com. Last Modified 16 May 2012. http://healthland.time.com/2012/05/16/study-a-20-fat-tax-would-improve-public-health/ Read More