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The link between excessive consumption of saturated fats, trans fatty acids, and sugar, and an increased risk of obesity, cardiovascular disease, diabetes, and various types of cancers, is now well established[1].
Because non-communicable diseases such as these are now the main cause of illness and disability in Europe (WHO, 2014), various policies aimed at discouraging this excessive consumption have been formulated and implemented. Food taxes are one such measure that have been introduced in a number of EU states, the seemingly simple premise being that by imposing excise duties on a particular ‘unhealthy’ food or food ingredient, consumption will be discouraged due to added cost, and increased tax revenue can be used to support other public health policies aimed at encouraging healthier lifestyle choices (Brownell et al., 2009; Leicester et al., 2005)
However, the factors influencing changes in European eating habits form part of a complex system where factors such as trade and agricultural policy, the advent of highly sophisticated food processing technologies and supply chains, the marketing and advertising of foods as products, and the changing sociological and cultural role played by food and eating, all combine to create a public health issue that is perhaps not amenable to simple solutions. It may come as little surprise, therefore, that the debate as to the efficacy of food taxes continues.
The Taxation of Fat and Sugar in Europe
The genesis of what is termed ‘environmental excise taxation’ – special taxation of goods whose prices do not reflect their true social cost of their consumption (Pigou, 1932) - can be traced back to the work of 20th- century English economist Arthur Pigou. Examples of Pigovian taxes would be duties on alcohol, cigarettes, gambling, polluting emission, and now (in some EU States at least) fat and sugar. More recently, experts in obesity have developed the concept of the modern food tax, designed to address a phenomenon whereby processed foods high in salt, sugar and fat, and low in nutritional value are often the cheapest on the market (Brownell, 2004, 2009; Pollan, 2009).
The question of whether or not these taxes are actually effective remains hotly contested. Although there is robust evidence to suggest that food taxes can operate to decrease consumption of ‘unhealthy’ foods (Powell at al., 2013; Thow et al., 2010), the evidence to support a positive health effect as result of this decreased consumption is less convincing, with some studies predicting a corresponding drop in the prevalence of various non-communicable diseases (Härkänen at al., 2014; Marshall, 2000; Sacks et al., 2011), while others predict that food taxes result in an adverse substitution effect leading to an increase in morbidity and mortality (Nnoaham et al,. 2009; Mytton et al., 2007).
This wide range of conclusions may correspond to a wide variety of approaches to studying how the use of tax policy can influence diet choices. One early form of empirical research focused on the relationship between price and demand for specific foods i.e. butter and margarines (Griffith et al., 2010); dairy products (Chuoinard et al. 2007); and soft drinks (Fletcher et al., 2010; Dharmasena and Capps, 2012; Gustavsen and Rickertsen, 2011). Some research addressed broader questions of commodity demand with less focus of impacts on health (Irz, 2010; Allais et al. 2010; Smed at al. 2007). Härkänen at al. (2014) note that some studies that tackled the health question (i.e. Nnoaham et al,. 2009; Mytton et al., 2007) did so using basic assumptions and estimates of commodity demand and price elasticity. One exception identified by Härkänen at al. (2014) - who themselves identify the absence of an agreed approach to conducting comprehensive analysis of health-based tax policies - is a paper by Tiffin and Arnoult (2011) that explicitly addresses commodity demand and health effects of a fat tax and concludes that taxes should be considered amongst a suite of policy measures.
Despite a lack of clarity on the mechanisms by which food taxes affect public health, promoting healthy food consumption through fiscal policies is now part of the WHO European Strategy for the Prevention and Control of Non-communicable Diseases 2012-2016 and Global Action Plan for the Prevention and Control of Non-communicable Diseases 2013–2020. In the absence of an overall EU strategy, several European/Scandinavian countries have proceeded to develop and implement their own food taxes i.e. Finland, Hungary, France (Mytton et al., 2012) and Denmark (Bødker et al., 2015).
Food Taxes in Practice: the case of Denmark
Some of the most useful examples of food taxes in practice can be found within Europe. A tax on packaged products with high sugar, saturated fat or salt levels was introduced in Hungary in September 2011[2] and a Danish tax on saturated fats was introduced shortly thereafter in October 2011[3]. 2011 also saw the re-introduction of a Finnish tax on processed foods high in sugar (including soft drinks and ice cream), and at the beginning of 2012, France introduced a tax on drinks with added sugar or sweetener[4].
Of these examples, the Danish saturated fat tax experiment has been the subject of the most study, perhaps because the tax was abolished a year after its introduction.
Lessons from Denmark
Bødker et al. (2015) identify three key issues as part of their policy analysis of the Danish fat tax. First, the Danish food industry was highly successful in employing various legal and political strategies to co-opt and influence the policy formulation process. Second, and partly as a consequence of the first factor, the law was poorly formulated to improve public health by reducing consumption of saturated fats and was instead designed and championed by the Danish Ministry of Taxation (not the Health Committee) to increase tax revenue and reduce administration of companies. Ultimately, the tax was abolished for similar reasons i.e. to protect the Danish economy. Thirdly, Bødker et al. (2015) highlight a profound absence of public health professionals in the policy formulation process, with food industry stakeholders being almost exclusively consulted.
The Danish experience can be taken alongside the current varied body of research to identify a number of implications and considerations for both consumers and manufacturers going forward.
Implications for Consumers
Whereas Caraher and Cowburn (2015) point to a body of research based on economic modelling which does not consider actual consumer behavior and reaction to taxes on food items i.e. Mytton et al., (2012), Mytton et al., (2014) and Shemilt et al., (2015), recent research does disclose a number of implications for consumers.
Recent systematic reviews (e.g. Thow et al. (2014), report how the most robust modelled studies targeting consumer behaviour (those considering substitution effect) identify the largest effects on consumption via taxes on non-core foods with close untaxed substitutes i.e. soft drinks. A corollary of this is that taxes on foods without these close untaxed substitutes can do little to improve food choices and can even have a disproportionate impact on low-income groups. This can result in food becoming more expensive, but no healthier for consumers, and arguably gives rise to the need for complementary measures that actively encourage better food choices e.g. subsidies and education.
Education can be seen as particularly important when one also considers the primarily economic motivations of industry stakeholders and the weakness of public health advocates in the policy making process. For example, without proper education, consumers are ill-equipped to decipher clever marketing strategies that dance on the head of a pin with regard to European food-labelling legislation whose formulation was itself heavily influenced by industry.
Implications for Manufacturers
The Danish experience shows how industry is often well equipped (no doubt borrowing from many of the strategies historically employed by the tobacco and alcohol industries) to influence the policy formulation process when it comes to excise duties on its products via a range of political and legal avenues - Panjwani and Caraher (2014); Moodie et al., 2013; and Mindell et al., 2012.
In attempting to avoid the potential for lost revenue, food manufacturers involved in the production and sale of foods or ingredients now classed as ‘unhealthy’ will likely continue to see a need to invest in actively lobbying to protect their interests. This can also take the form of legal challenges at European level as has been the case in many examples of European food tax experiments[5]. Increased cost can also arise where increased investment is needed to reconfigure food products in a way that reduces quantities of taxable ingredients, often with little or no positive impact on the nutritional quality of the product – Moss (2013).
Conclusion
Although food taxes alone will not solve the spread of non-communicable diseases, the taxing of other potentially harmful ingestible goods such as tobacco and alcohol demonstrates how fiscal policies are a useful part of an overall strategy involving a range of policy tools. The balance of current research would appear to suggest that well designed food taxes are effective in discouraging consumption of the ‘unhealthy’ food ingredient at which they are targeted. However, where taxes act as the ‘stick’, what is also needed is the ‘carrot’ coming in this case in the form of measures that encourage consumers to substitute taxed sugar and fat with not just any alternatives, but healthy alternatives.
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[1] See e.g. L. R. Vartanian, M. B. Schwartz, K. D. Brownell, ‘Effects of soft drink consumption on nutrition and health: a systematic review and meta-analysis’, American Journal of Public Health; 97 (2007), 667–75; S. French et al., Pricing and Promotion on Low-Fat Vending Snack Purchases: The CHIPs Study”, American Journal of Public Health 91 (2001)
[2] The “public health product fee” (2011/340/HU) which has since been increased, certain product categories broadened and new ones added - (2011/599/HU, 2013/622/HU)
[3] (2011/19/DK), but another proposal based on sugar content (2011/651/DK) was permanently shelved.
[4] An indexed tax of €7.16 per hectoliter on sugary drinks and drinks containing artificial sweeteners (2011/597/F) to “increase the price of sugary drinks, the uncontrolled consumption of which encourages weight gain, in order to encourage consumers to drink them less”.
[5] See e.g. A. Alemanno and I. Carréno, ‘Fat Taxes’ in Europe - A Legal and Policy Analysis under EU and WTO Law (2013) Eur. Food & Feed L. Rev. 97