Health tax on food works – but not really

Does a tax on unhealthy food actually work? A recent scientific study shows that it does work in Mexico, but one could question whether the measured impact actually makes a difference.

Overweight

In January 2014, Mexico introduced a soda tax of 1 peso per liter (about 10 %) and an 8 % health tax on food rich in calories (anything with an energy density of 275 kcal per 100 grams, including candy, snacks, ice, cereal, cookies, sauce and prepared meals) and with good reason. 70 % of adults and 33 % of children are overweight in Mexico. 

However, does such a tax really work? The Mexican National Institute of Public Health and the University of North Carolina researched the matter and analysed Nielsen numbers between January 2012 and December 2014, published in the PLoS Medicine this summer.

Significant drop

Researchers saw that the taxed items’ sales volumes dropped 25 grams per person per month in 2014, basically 5.1 %. Items that were not taxed were not influenced in any significant way. On top of that: households with lower incomes spend 10.2 % less on unhealthy food after the tax was introduced. The middle class dropped 5.8 % while the richer classes did not alter their purchase behaviour at all. 

The study confirmed that a relatively modest health tax can have a significant impact on purchase behaviour in the short term, mainly shielding vulnerable families from junk food. However, there was no study into whether this change actually helped improve the public health. The measured drop only represents 70 to 110 kcal per person per month, a very limited drop. 

Besides, sales in alternative, often cheaper, channels (like street corners) were not included in the measurements, so maybe Mexicans just bought their snacks elsewhere? The study therefore provides ammunition to both sides of the argument. 

Elsewhere?

The introduction of a sugar tax has barely changed anything in Belgium. Only the purchases around the border areas was actually influenced. Nevertheless, many countries are contemplating whether they should introduce a tax on unhealthy food. The government in the United Kingdom has already decided to introduce a soda tax in 2018, adding 10 cents to a can of soda. Television chef Jamie Oliver is extatic about the soda tax as he has been crusading for healthier food for years. 

France introduced a soda tax of 7 cents per liter and will increase it in 2017. Finland not only has a soda tax (22 cent per liter), but it also has a tax for candy and ice cream. Hungary and Romania also have their own version of a health tax, while Denmark tried and abolished the fat and sugar tax. In the United States, Philadelphia is the first city with its own soda tax. 

Only last month, Indian province Kerala introduced a 14.5 % fat tax on unhealthy snacks like hamburgers, donuts and pizza, mainly targeting chains like McDonald’s, Burger King, Domino’s and KFC. Apparently, Indians are altering their eating habits and moving towards unhealthy Western fast food in droves.