TAXING THE FOOD-IS IT ETHICALLY AND MORALLY JUSTIFIED?

Taxation and other financial impositions by governments all over the world are borne by the citizens believing that the money so collected goes for developmental activities beneficial to the citizen. But this does not happen, especially in an over democratic country like India where silent tax players never ask the government about lack of development in spite of paying taxes at rates unbearable to many. On top of it natural resources like spectrum, coal etc are distributed at throw away prices creating huge financial scams, depriving the government the much needed financial inputs for various developmental activities. Added to this a small percentage of citizens, that too mostly from the salaried class who pay income tax while a bevy of taxes are "innovated", like sales tax, value added tax, excise duty, import duty, service tax, wealth tax, road tax, property registration fees etc to fleece the citizens. While all these are understandable, what is reprehensible is the tax levied on food and drugs by state governments making them more expensive. How can any one justify taxing a basic food like food grain which is the essential for any human being to lead a normal life. Here is a critique on this subject.

'High taxes, levied by major food grain growing states of Punjab and Haryana, have made the Centre's task of selling wheat at low rates in the open market difficult. The taxes, ranging from 4.7 per cent in Madhya Pradesh to 11.5 per cent in Haryana and still higher at almost 14.5 per cent in Punjab, are incurred by the Centre while procuring grains from farmers every year at a fixed minimum support price (MSP). It is difficult for the Centre not to pass on these taxes to consumers at the time of selling grains in the open market as then its food subsidy burden will further inflate. According to some estimates, around 10 per cent or Rs 7,000 crore of the total food subsidy in 2011-12 was due to state taxes and levies, which the Food Corporation of India (FCI) paid by way of levies and taxes to different states".

Government of India generates inflation index periodically and one is not sure how reliable these figures are. Still a major contributor to inflation is the taxes levied on every conceivable consumer material the government can set its yes on! How can the private vendors and shops can be faulted if they also indulge in raising the prices on their own. Look at the hotel sector which has seen price hikes to the extent of 100% during the last two years as they are not covered by the rule of compulsory MRP declaration. Even those covered under MRP regulations consumers have learned long ago that the MRP declaration does not serve much of a purpose because, till recently, consumer products industry has been practicing fraudulent means in keeping the price line steady but progressively reducing the quantity within a pack! A honest government if it has any consideration for the sufferings of its people must exempt all foods, especially the basic ones, from the purview of punitive taxation!  The excuse that federal government in India cannot prevent the states from imposing tax on foods is just an excuse which the citizens cannot accept.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

   

SUBSIDIZING PURCHASE OF VEGETABLES-IS IT PRACTICAL?

Taxing "bad" foods to discourage consumption is an issue now being debated in some Western countries because of the harmful effects these foods are supposed to have on the health of their citizens. The obesity pandemic that is responsible for the creation of a class of people grossly over sized and bloated in appearance is caused by over consumption of cheap foods which are nutritionally unbalanced containing high calories from sugar and fat. Obesity is also responsible for the uncontrolled growth of unhealthy people suffering from CVD, Diabetes and other diseases. Therefore logically it makes sense to make these foods costlier by imposing punitive taxes. This debate is now sought to be expanded and there is a suggestion as reflected by the news report quoted below that authorities must also think of subsidizing healthy foods which generally cost more.

"Simply put: taxes would reduce consumption of unhealthful foods and generate billions of dollars annually. That money could be used to subsidize the purchase of staple foods like seasonal greens, vegetables, whole grains, dried legumes and fruit. We could sell those staples cheap — let's say for 50 cents a pound — and almost everywhere: drugstores, street corners, convenience stores, bodegas, supermarkets, liquor stores, even schools, libraries and other community centers. This program would, of course, upset the processed food industry. Oh well. It would also bug those who might resent paying more for soda and chips and argue that their right to eat whatever they wanted was being breached. But public health is the role of the government, and our diet is right up there with any other public responsibility you can name, from water treatment to mass transit. Some advocates for the poor say taxes like these are unfair because low-income people pay a higher percentage of their income for food and would find it more difficult to buy soda or junk. But since poor people suffer disproportionately from the cost of high-quality, fresh foods, subsidizing those foods would be particularly beneficial to them. Right now it's harder for many people to buy fruit than Froot Loops; chips and Coke are a common breakfast. And since the rate of diabetes continues to soar — one-third of all Americans either have diabetes or are pre-diabetic, most with Type 2 diabetes, the kind associated with bad eating habits — and because our health care bills are on the verge of becoming truly insurmountable, this is urgent for economic sanity as well as national health".

How far such a radical proposal can be effective remains to be seen. The past examples of alcohol and tobacco industries going through this route do not give any hope that this will work. But subsidizing healthy foods can definitely be an encouraging and citizen-friendly act that deserves consideration. If in a country like India there is no mass starvation due to economic reasons, it is mainly due to the subsidized food grains being supplied at fraction of a rate compared to market prices. It is a tragedy that protective foods like fruits, vegetables, milk etc cost much higher than processed foods which are mostly made from cheap food grains like corn subsidized heavily by governments. The proposal of taxing unhealthy foods is at least justified if there is cross subsidization of healthy and protective foods.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

THE "TAX CRAZY" GOVERNMENT-AIR IS NEXT TARGET?

During the last six decades there has been incessant chanting by every government that ruled India that food processing is critical to the development of country's economy. Every politician with every hue does not lose an opportunity to give an expose regarding the low value addition to agricultural commodities achieved in the country and predominance of low value food items in the basket of national exports. That food industry is a logical corollary to agricultural sector is indisputable and GOI did recognize this truth when the specialized MFPI was set up in late 1980s. That this ministry was invariably "managed" by a junior minister. is another matter that reflects the gap between preaching and practice. Umpteen number of seminars, conferences, workshops, meetings with GOI babus have been making the point that processed food must not be taxed at all for at least for a few years to enable the processing industry to establish itself on a firm foundation and making packed foods available to the consumer at the lowest cost possible. Every Finance Minister (FM) of GOi had ignored this so called sun-rise industry and tried to milk it as much as possible to enrich its coffers! Here comes the latest blow to the industry with the present FM putting another economic burden on the food sector through his ill-advised levy in the form of excise duty which ought to be condemned in no uncertain terms.

"The entire food processing industry is feeling the pinch of this announcement (excise duty). We have written a letter to the Finance Minister. I hope he will look into it," Minister of State for Food Processing Harish Rawat told reporters here. He said that industry bodies have complained that the 130 items on which 1% excise duty has been increased include food items as well and this will lead to an increase in prices. Food inflation came down to 9.52% for the week ended February 26 from 10.39% in the previous week. Rawat, while inaugurating the National Seminar on food ingredients and additives on the sidelines of the Aahar 2011 international food and hospitality fair, said, "The ministry has requested the Finance Minister to keep GST and other taxes at a minimum level." The All-India Food Processors Association (AIFPA), which organised the seminar, has sought the removal of 1% excise duty on food and agricultural commodities, besides the waiver of Goods and Services Tax (GST) on food items. "With GST also, there should be no tax on food. When you tax food, you are taxing the value addition in the sector and this will lead to price rise as cost of inputs will go up and my worry is this will further increase the inflation," AIFPA President Piruz Khambatta told PTI.

No wonder many industry captains feel that they do not need any prop from the government and they would be happy if the rigid bureaucratic stranglehold by the government is done way with immediately. If governments do not want to help in any significant way, at least there should not be any road blocks that can affect the morale as well as the motivation of the entrepreneurs. Interestingly total revenue collected by various government agencies through their multiple taxation regimes on food industry is so minuscule that fore going the same will not be a sacrifice in any way. On the other hand, such a step will provide the necessary spark for a strong industry capable of generating millions of job opportunities and a host of products so vital for the consumers. Probably a strong industry after attaining some critical size may even contribute to the exchequer substantially in the long run.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

BLOATING BODIES-A PROFESSOR'S CURE!

There are many divergent views about the relation between food and nutrition, some even against the present established norms of nutrition science. There are claims that fat is not responsible for obesity, salt is not injurious to health, sugar is not harmful, HFCS cannot be blamed for some of the disorders, etc. Of course absence of unanimity always presents problem when food standards and policies are to be drawn at national and international levels. But what is galling is the continued vacillation in taking bold policy decisions that will have a chance to reverse the present trend of uncontrolled production and consumption of unbalanced products being churned out by many manufacturers in the food processing sector.

"But the professor said New Zealand was going against the world trend, even among conservative governments. Its policy amounted to a subsidy for bad foods and taught children that eating them was normal. He said obesity and the diseases it causes - such as heart disease, diabetes and some cancers - would overwhelm health services without major changes. Simply telling people about healthy eating and activity was of limited value as educational methods worked only on the well educated".

"PROFESSOR'S CURE * Ban junk food from state-owned premises.* Reduce GST on fruit and vegetables and increase it on foods high in sugar, salt and saturated fat.* Introduce coloured "traffic light" labels to grade packaged foods for consumers from healthy to unhealthy.* Ban food marketing to children.* Establish food and activity requirements for school".

Though many of the cures proposed are already known, there is no unanimity amongst scientists as well as the policy makers regarding desirability of controlling the industry too much, especially under a democratic system. It is better that a universal consensus is evolved amongst the members of WTO that can be the basis for evolving a sound policy of influencing the "health content" of products from the industry which will help not only the consumers in each country but also facilitate hassle free global trade in "good" foods.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

A 'FAT' TAX-WILL IT WORK?

Many policy options are being considered in different countries to discourage consumers from gorging on high fat foods which are incidentally are cheaper and tastier than nutritious foods. Fast food joints are banned near residential areas in some places in the US but the effect of such forceful denial of these high calorie density foods to craving consumers and hypothetically tackle the rampant obesity epidemic at best is marginal as has been brought our by some studies. Latest attempt to impose higher taxes on fast foods to make them costlier is an option being considered in some countries.

"Cheap, abundant corn enables mass production of economical, aggressively marketed beef and pork. The corn syrup that sweetens soft drinks and candy oozes from the same source. That's why it's so cheap to be fat and -- comparatively -- so expensive to be thin. In response, a comprehensive preventive health strategy should shift subsidies away from corn toward the production of fresh fruits and vegetables as well as organic farming, so healthier, more natural foods become as accessible as Happy Meals and tax fast food, soft drinks, and packaged foods high in processed fats and sugars to decrease demand for unhealthy food. A study published recently in the New England Journal of Medicine recommends a tax on "sugar-sweetened beverages," projecting that for every 10 percent rise in price, consumption of soft drinks would decline a corresponding 8 to 10 percent, leading to weight loss and reduced health risks".

If history has some thing to offer, it is that making a product costlier does not deter the consumers from going for it as seen in the case of cigarette or alcohol. During the last 7-8 decades prohibition as a policy to prevent people from consuming alcoholic beverages failed miserably all over the world and to day governments themselves are selling liquor products in the name of preventing spurious and unsafe products that can harm the citizens. It is debatable whether that is the real intention of the governments or it is the massive revenues generated by this line of business!

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

TAXING THE RICH AND SAVING THE PLANET-THE IMF RECIPE

Massive restructuring of the economies of the third world by international monetary agencies, while offering financial support, has helped them to achieve perceptible progress as measured by growth in GDP and infrastructure. But it seems to have changed the social fabric by increasing the disparity between the rich and the poor. True, some developed countries offer economic aid to cushion the effect of such transitional efforts but it is considered too little to make any visible impact. Often such aids come with strings attached and many countries are forced to accept them for their very survival.

Recent economic crisis precipitated in industrialized, rich nations due to mismanagement had the percolation effect on developing countries which had to bear the "cross" for no fault of theirs. The very idea of providing a "safety net" for such countries, as being mooted by international agencies is a welcome initiative. "Meanwhile, the head of the IMF on Friday called for a tax on the financial sector to protect the world economy from the "systematic risk" it creates. According to the IMF the global economic crisis is hitting low-income countries harder than anticipated, increasing their need for aid. It said however that past gains from macroeconomic stabilization and debt reduction, together with some increase in aid, have created space in many countries for counter-cyclical policies, and IMF-supported programs have accommodated such policies to address the impact of the global food, fuel and financial crises".

How far such a proposal will find favor with those who have the wherewithal to raise the required resources, remains to be seen but if accepted it can be of great relief to the teeming populations in Asia, Africa and South America whose numbers seem to be increasing day by day. Even if the proposal finds broad support, the "nut and bolt" details about the program need to be worked out.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com