Wednesday, June 5, 2013


Why do the governments world over impose taxes on products and services? Obviously because they want to generate resources which can be spend for their economic and social development. By far taxes in the form of sales tax, value added tax, octroi, entry tax etc spread the net far and wide among the citizens and generate huge revenue for the governments. The concept of using taxation as a tool to regulate consumption is relatively a new phenomenon and most common examples are Cigarettes and alcohol products. It is true that both smoking and alcohol consumption are not considered safe and therefore taxes on them are frequently increased to make them costlier while reducing the overall consumption. While such a strategy seemed to have worked in the case of tobacco products, the result in the case of alcoholic drinks cannot be considered a success. In a recent report it was revealed that the high end Scotch Whiskey demand world over is rising rapidly though it is one of the costliest among spirit products! This approach was tried on foods also in Denmark where taxes were hiked on products considered highly unhealthy containing high amounts of fat and sugar. The result was not very encouraging because in the EU with a no restriction on inter country travel within the Community, Danish citizens had always access to cheaper products across the borders! Same strategy is now being thought of in Australia where plans are afoot to impose a "fat tax" on foods containing above a certain level of saturated fat. Here is a commentary on this new initiative to control obesity in that country where almost two thirds of the population is considered overweight. 

"The fat tax will apply to products containing more than 2.3 percent saturated fat. This will include but not be limited to oils, meats, cheeses, processed products, and fast foods. With 63 percent of Australians are overweight and nearly 22 percent of adults have high blood pressure, it is no wonder that such stringent actions are being put into action. The chief executive of the Heart Foundation, Lyn Roberts, said that more Australians were at risk of eating themselves to death. In order to boost the success of this new fat tax, has published new dietary guidelines for Australians to follow, along with advice on choosing the right foods. In view of efforts like this, the fat tax is hardly as wicked as it first sounds. Sure, prices will increase, but the Australian population will learn how to manage their eating habits in a healthier way. Obesity Policy Coalition spokeswoman Jane Martin said policies encouraging physical activity and healthy eating appeared to stabilize, instead of increase, the numbers of overweight and obese children, but other efforts, such as this tax, were needed to reduce the numbers in the obese population. However, drawbacks to such a measure have been seen in Denmark as well as New York. When Danish officials attempted their fat tax, residents simply visited other countries to buy sugary beverages and fatty foods at an affordable price. When Mayor Michael Bloomberg attempted to restrict the sale of sugary beverages greater than 16 fl oz., residents protested and the law was never passed. These results may not necessarily be duplicated in Australia, as the country has established that more than half of its population is overweight and needs to urgently cut back on fat consumption".

Will Australia succeed where Denmark has failed? Probably yes because the nearest market to Australians is New Zealand which is about 2000 miles away. Government can also hike the import duty on such foods it considers as unhealthy. Desperate situation demands desperate efforts to address the problem and Australia really needs to tackle the "body bloating" syndrome now and here! One positive aspect of this policy orchestration is that the additional revenue generated is slated to be spent on subsidizing healthy foods which invariably cost much higher world over including Australia. It is an unprecedented tragedy that the consumer prices of unhealthy foods are declining significantly while that of healthy foods like fresh fruits, vegetables, whole grain products etc are showing an opposite trend putting them beyond the reach of more and more people who really need them to maintain decent health. 


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