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  1. Analysis
October 31, 2012

Nutrient taxes: Canada and the US

While events in France, Hungary, Denmark and Ireland ensure that the nutrient tax issue is being hotly debated in Europe, the issue has also been a subject of discussion in the US and very recently in Canada.

While events in France, Hungary, Denmark and Ireland ensure that the nutrient tax issue is being hotly debated in Europe, the issue has also been a subject of discussion in the US and very recently in Canada. 

Last week, the Ontario Medical Association (OMA) included increasing taxes on unhealthy foods as part of a range of policies it recommended to tackle obesity. Childhood obesity rates in Canada have risen to 31.5% against 14% to 18% in the 1980s.

While industry advocates and health economists have warned against likening food taxes to tobacco taxes (see Part Two of this briefing), the OMA made a direct comparison between the two. It said that “numerous anti-tobacco campaigns” had helped reduce the number of smokers, and called for the imposition of “similar measures on obesity-causing foods”. 

This suggestion was quickly condemned by the association that represents food producers, Food and Consumer Products of Canada (FCPC), which echoed the sentiments of other food industry advocates. 

“Food is not tobacco,” said Phyllis Tanaka, FCPC vice president for scientific and regulatory affairs. “Tobacco has no place in a healthy, balanced lifestyle. A tax on food and beverages is nothing but a tax grab that will hurt lower and middle income Ontarians the most.”

In fact, not all medical groups in Canada concur with the OMA’s view on fat taxes. Dr Lloyd Oppel of the British Columbia Medical Association said: “I think it would be difficult to draw up a list of things that were truly bad versus things that are truly good and be able to implement a tax on that basis. Not that it’s impossible to do something in that direction but it would be a tough road I think.” A response from Dietitians of Canada also failed to back the OMA call for taxation.

In his blog, Dr Arya Sharma, founder and director of the Canadian Obesity Network, which brings together researchers and health professionals working in the field of obesity, voiced reservations about the OMA recommendations.

In an article that would give succour to any food industry organisation mounting a campaign against taxation, Dr Sharma wrote: “Rather than calling for populistic and unproven policy strategies, many of which fall in the categories of tax, ban, shame, blame, scare, punish, and have yet to prove effective in any jurisdiction in preventing childhood (and ultimately adult) obesity, I would have much preferred Ontario’s doctors to turn inward to look at steps that they could themselves take to better tackle this epidemic in their offices.”

The OMA intervention comes as the Ontario government concludes a wide-ranging consultation on the subject of childhood obesity. The Healthy Kids Panel was convened in May and will report to the Ontario Minister of Health, probably in late November or early December. Ontario is the first provincial government to undertake such a consultation.

While this consultation and the measures that might stem from it would only be applicable to Ontario, Derek Nighbor, senior vice president for public and regulatory affairs at the FCPC, believes they could be influential throughout Canada. Ontario is the nation’s most populous region “so people will be watching”, Nighbor says. 

The fact that the government is consulting with a wide range of stakeholders, including industry, augurs well, Nighbor believes, for a consensus-based approach involving multiple policy options, rather than the imposition of taxation. “I would expect and I hope that taxes on these products aren’t part of the solution because of their regressive nature and taxes are proven simply not to work,” he says.

He maintains that the national and regional governments in Canada have taken account of the role industry can play in tackling obesity, as reflected in the collaborative work industry has undertaken with government – and NGOs – on education around nutritional labelling. “The food industry does have a role to play and we take that role very seriously,” Nighbor says. In addition to the work on nutrition literacy, he cites progress on product reformulation and voluntary controls on children’s advertising and marketing.

Meanwhile, the issue of soda taxes has remained high on the agenda of public health bodies, food industry organisations and consumer advocacy groups in the US.

In May, a report by the Institute of Medicine (IOM) included “implementing fiscal policies aimed at reducing overconsumption of sugar-sweetened beverages” in a range of recommended strategies aimed at reducing obesity. This could be achieved, the IOM stated, either through pricing and other incentives to make healthier beverage options included in the Dietary Guidelines for Americans more affordable, or by “substantial and specific excise taxes on sugar-sweetened beverages”, for example by cents per ounce of liquid or cents per teaspoon of added sugar. 

While there is currently little support in Congress for federal action on soda taxes, such measures have been seen at a state level. Food is exempt from state sales tax but in around 12 states that exemption has been removed for sodas, creating a de facto soda tax, albeit one only set at single-digit percentages.

City authorities have also moved to introduce localised soda taxes. In fact, two cities in California, Richmond and El Monte, will hold referenda next week on precisely that issue.

Dr Michael Jacobson, executive director of the consumer interest group, the Center for Science in the Public Interest (CSPI), believes that the IOM report could encourage more city and state legislatures to introduce local soda taxes. While he concedes that the IOM would be little recognised by everyday consumers, he says “city and state legislatures like to use reports like those from the IOM to justify their proposals, so it’s influential with legislatures”.

Moreover, in spite of the soft drinks industry being “willing to invest any amount of money, tens of millions of dollars, to stop any tax”,  Jacobson believes there will be more steps taken around soda taxes over the coming few years and “action will come at a city and state level”.

Interestingly, Jacobson also believes there is potential for hypothecation in this area in spite of the fact that local legislatures, like all governments, are wary of earmarking revenues for specific uses. 

In fact, he views CSPI and other consumer advocates as having a “double challenge”, both to encourage the introduction of local soda taxes and to have the funds collected diverted to health initiatives. Interestingly, the IOM report also advocated a hypothecated element to this strategy, recommending that revenues from beverage taxes be dedicated to obesity prevention programmes. 

Echoing a point made in the Mytton et al. report mentioned earlier in this briefing, Jacobson believes consumer sentiment around the obesity issue and soda taxes is likely to change over time, creating a more conducive environment for the imposition of such legislation.

“This issue is so new that it’s not surprising that people aren’t familiar with it, but like with so many issues as people become accustomed to it, it will seem more and more reasonable,” Jacobson tells just-food. “These proposals are going to crop up either as legislation or referenda, and there is so much concern about obesity and growing knowledge that soft drinks are a major cause of obesity, that I think we will see some taxes, large or small, with at least some of the money devoted to health promotion activities.”

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