Should NZ introduce a Fat Tax?

Would a “fat tax” be a step too far?  Could the tax system perhaps encourage Kiwis to be healthier?

It already does.  Imagine how many more Kiwis would die prematurely from smoking related conditions if not for the fact that cigarettes are artificially expensive with around 70% of their price made up of tax?

Who would seriously argue the excise duty on cigarettes should be removed?  Not many, I’d say.

So I followed with interest the debate around Labour’s proposed removal of GST on fresh fruit and vegetables.  A significant number of Kiwis die prematurely each year from conditions related to obesity, so maybe Phil Goff was onto something with this one?

Labour’s premise was that if fresh fruit and veges were less expensive, Kiwis would on average substitute them for less healthy options and the overall health of the nation would improve.  Interventions through the tax system clearly work for smoking, so why not use the GST system to fight obesity?

Not unreasonable on the face of it, I thought.

But I had my doubts about the success of this particular concept.  Food items are carefully priced to the market – almost always at a price that ends in .99c.  If bananas sell for $2.99/kg now they would not stay for long at $2.60 after the removal of GST – they’d soon creep back to $2.99 with an increased margin for the retailer.

And with the election behind us, we’re unlikely to put that debate to the test in real life New Zealand any time soon.

But the idea of using the tax system to influence behaviour hasn’t gone away – and nor is it the exclusive territory of the Labour party.  John Key removed depreciation allowances on buildings because he also believed that changes to the tax system could be used to modify people’s behaviour – in this case dampening the Kiwi love affair with property investment.

So back to the idea of using the tax system to fight obesity.  Is that workable, or would such a scheme just amount to meddling around the edges of a larger problem?

By looking to Denmark we can soon get the answers to those questions.

On 1 October the Danish parliament introduced a new “fat tax” with the intention of reducing cardiovascular disease, obesity, and diabetes.  The tax imposes a price increase based on formula of 16 krone per kilo of saturated fat on any food that contains more than 2.3% saturated fat.

Bold.  And a world first.

Will the fat tax change behaviour enough to increase the average Danish lifespan or improve the health of the Danish people?  I guess we’ll know for sure in ten years or so when the results of longitudinal studies become clear.

But how about us Kiwis?  Is this the sort of intervention our political leaders should be considering?  Would this be too much intrusion into our lives – and an affront to our free will?  Or is it appropriate that the state puts some energy into countering the millions spent by multinationals who market tobacco and calorie-rich convenience foods that on average reduce our life expectancy?

I think it’s an interesting concept that has merit – and I’ll be watching with interest to see how this unfolds in Denmark.