Paris, Wednesday, October 1st, 2014 – With the approach of talks on a social security financing bill, there is a strong temptation, as deficits grow ever deeper, to return to the idea of broader and higher nutrition taxes. It would be illogical, however, to seek to raise taxes that end up weighing more heavily on household budgets at the very time that lowering burdens on households and businesses is being discussed.
It is vital to understand that the impact of nutrition taxes on the consumption of nutritionally poor food is unclear and that there is a sizable risk of instituting additional constraints on the country’s economic activity without getting the expected public health benefits.
Too Narrowly Focused Analysis
The proposed solutions to the problem of excess weight rely on three limited lines of analysis.
• Obese people produce extra costs for society: What seems true for a single year may not apply when measured over a full lifespan (obese people in fact generate 12% lower costs).
• It is irrational to eat too much nutritionally poor food: This is less true if we take account of the increased value of time, the decline in heavy labour during the 20th century and the lower cost of food.
• Social inequalities make it hard for poorer people to have access to high-quality food: This also is inaccurate if we consider that food as a share of household budgets in France has fallen by half since 1950.
Nutrition Taxes’ Unclear Impact
This type of taxation assumes that we know the sensitivity of individuals to price variations, something that is impossible to ascertain accurately. Taxation may actually lead to a reduction in moderate consumption without penalising abuses.
A tax would cause people to find ways around taxation, resulting notably in the emergence of black markets, or parallel trade as in Denmark, where the imposition of a “fat tax” led up to 48% of Danes to shop abroad.
Finally, taxation produces substitution effects. Consumers could, for example, switch from a premium brand to a cheaper brand.
When Government Sticks Its Nose Onto Our Plates
• Solutions that emerge on the market and that are less onerous for society in the long term are underestimated or disregarded.
• The satisfaction people get from their activities (including nutrition) is disregarded.
• Health policies find justification in pressure group dynamics.
• The use of the body mass index is controversial. Moreover, it is not even certain that saturated fats have the negative effects that are so widely denounced. A growing number of studies reject the link between saturated fats and cardiovascular illness. Palm oil, though broadly denigrated, has worthwhile nutritional properties and provides major economic benefits.
“In the end, you have to show a certain humility toward the social and biological process,” says Frédéric Sautet, the author of the IEM study. “The Daudigny-Deroche and Hercberg reports note that poor nutrition and its effects are a complex problem that calls for a whole set of solutions. They however favour what is essentially a tax solution, because they underestimate the cost of the proposed tax and subsidy system.”
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The Institut économique Molinari (IEM) is an independent, non-profit research and educational organization. Its mission is to promote an economic approach to the study of public policy issues by offering innovative solutions that foster prosperity for all.
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Information and interview requests:
Cécile Philippe, PhD
Director, Institut économique Molinari
+33 6 78 86 98 58