Consuming issues: A taxing question
Industry appears to have strong arguments against nutrient taxes
As it has done elsewhere, the food industry is opposing the imposition of a tax on sugary drinks and high-calorie foods in Mexico. The industry has been generally successful in forestalling the imposition of nutrient taxes and its reasons for opposition - such taxes are ineffective and regressive - carry some weight. But, Ben Cooper writes, when industry is seen to have prevailed in debates purely by dint of massive lobbying power, issues of trust and credibility inevitably arise.
The news that Mexico is set to introduce a tax on high-calorie foods and drinks has resulted in a fresh rehearsal of the nutrient tax debate. Two questions are often discussed: are such taxes effective in addressing obesity? And are they fair?
Most of the research has been based on modelling rather than evidence and the fact that we are short of experiential data tells its own story. Nutrient taxes are not politically palatable and evidence for them having a significant effect on rates of obesity and overweight is relatively weak.
As it happens, just as the news in Mexico broke, a new study looking at the potential effectiveness of a soda tax in the UK was published in the British Medical Journal (BMJ). That study concluded a 20% tax on sugar-sweetened drinks would lead to a reduction in the prevalence of obesity in the UK of 1.3%, or around 180,000 people, and that the "taxation of sugar-sweetened drinks is a promising population measure to target population obesity, particularly among younger adults".
Interestingly, two of the researchers behind this study differ on whether this is a sufficient effect to justify the tax. Professor Richard Tiffin, director of the Centre for Food Security at Reading University, told just-food last week he believes it does not. Meanwhile, Dr Oliver Mytton of the Centre for Diet and Activity Research (CEDAR) at Cambridge University says he "would come down on the side of advocating for such a measure".
That the data should elicit two opposing conclusions from the authors arguably serves to underline the inconclusiveness of the case for such taxes.
On the second question of fairness, there can be little dispute. Nutrient taxes are demonstrably unfair. Taxing those who have no problems with obesity by making certain foods and drinks consumed as part of a balanced diet more expensive could not be described as just. That said, there are plenty of examples of flat-rate taxes to be found, VAT of course being the most glaring example. Policymakers are not always deterred from imposing taxes on the grounds of fairness.
If there were strong evidence that such a tax would substantially reduce obesity rates, policymakers would be more persuaded that the indiscriminate nature of this fiscal measure would be worth tolerating. History suggests that in spite of the escalation of obesity rates in so many countries, governments remain unconvinced. Mexico appears the exception rather than the rule.
There is a further aspect to the fairness question, however, namely the fact that nutrient taxes are by definition regressive. Since lower-income groups spend a larger proportion of their income on food, they are disproportionately penalised by such a tax.
Adding a further nuance to the debate, lower-income families tend to have worse diets and a higher prevalence of obesity, so some might argue that it is a good thing they are hit more heavily by such a tax. Interestingly, the recent BMJ study does not bear this out. It concludes the greatest effects may occur in young people, but there would be "no significant differences between income groups", though it added both effects warranted further exploration.
And even if making the obese poor pay more for their sugary drinks were to have an impact, what about the disproportionate and unjustified impact on a poor family with no dietary health problems whatsoever?
Furthermore, if the tax needs to be set at 20% or above - considerably higher than any taxes imposed or mooted so far - to have any impact it is even less fair and even more regressive, not to mention politically challenging.
All in all, these considerations give the food industry a substantial foundation for lobbying against nutrient taxes. Industry is naturally resistant to regulation and fiscal interference in a free market but on this occasion it does not need to resort to Hayek or Friedman for support. In this instance, opponents may find it harder to characterise industry protestations as big business clinging on to commercial freedoms that left unreformed impinge on the health of the population.
However, just because the industry's position on nutrient taxes is credible does not mean its overall position on policy aimed at tackling obesity is. Indeed, the relative weight of argument on nutrient taxes puts industry positions on other areas of policy in an interesting light to say the least.
That so few examples of nutrient taxation have made it to the statute book bears witness to the weight of argument against and the political perils of foisting sin taxes on the population, but also to the lobbying power of big business. The US soft drinks industry has spent millions of dollars lobbying against soda taxes when they have been proposed at city or state level and will undoubtedly continue to do so, but 'big food' has wielded its lobbying muscle on other subjects too, and prevailed in arguments where its position was more tenuous.
Among the many discussions about how policymakers should respond to high obesity levels and diet-related health issues, two particular debates on different sides of the Atlantic come to mind.
When the Obama administration wanted US government agencies to act on children's food advertising, where it perceived the self-regulatory measures in place to be insufficient, the industry mobilised and ultimately derailed that process. While it has to be said the industry also substantially beefed up its self-regulatory programme, many other stakeholders would have preferred the government-led action to be followed through, and it was essentially lobbying that put paid to it.
In the UK, meanwhile, the process of arriving at a uniform system of front-of-pack nutritional labelling featuring colour-coding has been an agonisingly slow process, in spite of some pretty hefty evidence in its favour, with food manufacturers the primary reason for the delay.
While there is much to be said in support of the industry's opposition to nutrient taxes, opposition as a default ultimately erodes trust and is dangerous. Success in stalling or tempering draft policy will often be perceived as big business wielding its influence, and when the issues being discussed are quite literally matters of life and death this is arguably not very edifying.
If food and drinks companies have to be dragged kicking and screaming to a position of even qualified acquiescence on every policy debate, particularly where the weight of scientific argument and stakeholder consensus appears to run counter to the corporate view, the industry's overall credibility is compromised.
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