Professors Linda J. Cobiac of the University of Melbourne, King Tam and Lennert Veerman of the University of Queensland and Tony Blakely of the University of Otago yesterday published their cost-effectiveness modelling study Taxes and Subsidies for Improving Diet and Population Health in Australia. The study advocated for a tax to be implemented on saturated fat, salt, sugar, and sugar-sweetened beverages and a subsidy on fruits and vegetables. The authors then applied the tax in simulations based on price elasticity and cost-effectiveness models of taxation.
There are two things fundamentally wrong with this tax, and by extension, subsidies on fruits and vegetables.
Firstly, many of the suggestions made by the authors are reckless and in some cases, dangerous. They are not only injurious to health but also hurt low-income earners given that the poor spend a higher proportion of their income on food than the rich.
On page 7, Cobiac et al state that for a reformulation scenario they devised, they assumed that sugars in sugar-sweetened beverages could be replaced by artificial sweeteners. However, the case against artificial sweeteners has been gaining traction and growing in recent years. There are many health experts who now state that artificial sweeteners are not a healthier alternative to sugar. In fact, artificial sweeteners are now widely considered to be more unhealthy than conventional sugar used in soft drinks.
One example is the use of Sorbitol in sugar-free alternatives to popular soft drinks. Sorbitol is widely known to have the common side effect of diarrhea, but severe reactions can include tightness of the chest, rectal bleeding and vomiting, among others. This is a dangerous and irresponsible way to justify an unreasonable and unfair tax.
In the same paragraph about the reformulation scenario, the ATA notes that the authors suggested replacing high saturated fats with palm oil. Given that proponents of this tax tend to be on the political left, this is rather ironic given the current campaign against the use of palm oil by the left in Australia on ethical grounds.
Secondly, the researchers admitted that the only way a tax on saturated fat, sugar and salt would be economically feasible for struggling low-income earners would be to subsidise fruits and vegetables. Cobiac et al state that the subsidy is necessary for ‘a net improvement in health and a net reduction in the costs of disease treatment.’ Essentially, all this means for low-income earners is that they would not be better off and that their freedom of choice in supermarkets would be severely restricted. The assumption that consumers can be guided by price manipulation into simply replacing products containing sugar, salt and saturated fat in their diet with fruit and vegetables, whilst sounding wonderful in theory, is inherently absurd.
The values and models used by the authors are also problematic. The food categories in the study are lacking in specificity and the researchers tended to overestimate effects of price on the quantity of food consumed. A better approach would be to focus solely the correlation between the prices of certain foods and obesity.
Finally, using Denmark as a case study highlights the fact that the economic effects of the tax would be detrimental: Danes would switch to cheaper brands and would go to Sweden and Germany to do their shopping. Furthermore, 10% of the revenues were spent on administrative costs and the tax cost approximately 1,300 Danish jobs. The tax was scrapped after 15 months as the Danes, no strangers to favouring ‘socially progressive’ policy, recognised that the harms it caused were not outweighed by any of its supposed merits.
The ATA’s position is that there should be no tax dictating Australians on the food and drinks they can and cannot consume. This is antithetical to the freedom of choice that underpins Australia’s democracy and our way of life. Raising the prices of food in the name of good intentions is a patronising attack on the poor and most vulnerable in our society that denies them the agency to make decisions for themselves. To back this tax reduces the choices available for Australians shopping for food that is already barely contained within their household budget.
The full version study can be found here.
Marija Polic is a Research Associate at the Australian Taxpayers' Alliance