The Case of Taxing the Poor Burger in Kerala
By Rahul V Kumar*
There could be
several reasons why a 14.5 per cent fat tax on a
burger and related products (sandwiches, pastas, doughnuts, pizzas etc)[1]
was imposed by the new Left government in Kerala. High on that list could
be the possible projection by the media that the government is concerned with the
health of its citizens. Given that individuals
in Kerala are well aware of the various health concerns as well as emerging
issues (fed by innumerable awareness campaigns, health magazines, as well as
television programmes in which they directly interact with doctors) a tax on
burger seems a tad too stretched to meet the goal of better health. Considering
these speculations the government seems to have categorised the tax under the
head of revenue generation. However,
the implied notion of a tax to promote health looms large over this budgeted
move. The question is does taxing to
reduce consumption serve the purpose of improving health? It seems to resonate
with the high taxes on alcohol which has not proven to reduce consumption. As
in the case of alcohol such taxes could also be indicative of a ban on junk
food in the near term. It is very
unlikely that individuals in Kerala are unaware of the health consequences of
‘junk’ food. The probability that the choice of ‘junk’ was an informed consent
between the producers and the consumers seems very high. If individuals have
thus chosen ‘junk’ over ‘non-junk’, it indicates that the market has
strengthened in response to demand. This is
same as the case where there are increasing numbers of outlets serving organic
food items. Left to its own the market will signal individual choices more
freely than when controlled thorough restrictive taxes. The consequences of
such artificial restrictions could prove costly.
There are initially
some definitional concerns in taxing selected food products. How do we define
and tax a group of ingredients which are
categorized as a ‘burger’ or ‘pizza’ or ‘pasta’? Suppose tomorrow these
ingredients are modified to retain much of its similarities but with a change
in name and form does it still stand taxing? The problem is that there are
innumerable variants in which these ingredients can be assembled essentially
retaining its taste. The question is: Is the burger ‘junk’ or is it the
combination of ingredients that make it ‘junk’? So do we tax the burger or the
ingredients which cause fat? It is only a
matter of reassembling these ingredients before the market is able to retain the old habits. That said the
question of what constitutes junk also needs to be re-examined. Selective
taxation of food which entered our culture from outside might indicate intolerance of other cultures. Consider for
instance our growing eating styles and habits in Kerala. There has been large increase in the number of small vendors
serving fried snacks across the state. Individuals can be seen crowding such
joints in the evenings and enjoying their share of these products. This is also due to various reasons; women
working, difficulty to manage maids, inflation of the food ingredients higher
to the food products etc. All these products irrespective of what
they constitute are high in unhealthy fats and cholesterol. If health is a
concern these eateries also stands questioned. Such small vendors are
significant drivers of the market for food and food products and any
restrictions on them are likely to influence demand generation in the economy.
Long term effects of such policies can be
examined through Bihar’s case where tax has been levied on samosas and sweets.[2]
The case of a fat tax in Denmark and the ‘metabo’ law in Japan run parallel to
such policies. Denmark was forced to abandon fat tax within a year of its
introduction.[3]
An obvious
consequence of the tax would be an increase in price
of products served in the growing food industry sector in Kerala. There is an
issue with the tax on basmati rice, pizza, burger and wheat products at the
same time. It is unlikely that the government intends
to do as it covers all the food items available in the market except our own rice. At the same time, there is an
increase of tax for coconut oil that will lead to the price rise in the food served
at restaurants again. In addition this
could also shift usage from coconut oil to other edible oil available in the
market. Awareness and the availability
of the data on the ingredients front in the so called junk food is one of the solutions
rather imposing a partial ban through higher taxes. Let the data be out as in
the case of Mac, KFC and Burger King. There
are also questions that remain unaddressed and needs further investigation. How
do we define saturated and unsaturated fat and to what percentage? Who and how
we will decide the content to tax. It is like good cholesterol and bad
cholesterol. Especially in Kerala, how will it affect the middle class and
upper middle class who consume these?
Will they be affected by this rise? What happens to the beef and other
ingredients which could also be a fat source?
Obesity is a major
health issue which is a concern for most developed nations. Several countries
have adopted reforms and measures to decrease instances of obesity. A possible
explanation in most of these reforms has
been to transfer the onus to the private sector to sponsoring healthcare.[4]
However, transferring healthcare cost to the private sector through taxes does
not simultaneously reduce the role of the government in this sector. If health
is the major concern the government ought
to liberalize the sector and allow for competition to prevail. Insurance
coverage could be enhanced; health vouchers could be issued; and foreign investments could be liberalized for the
sector and so on. These factors could take our health status to higher levels.
A tax is more likely to disrupt a growing food industry than creating a
necessary safeguard for the health of citizens.
*The Author is Research Consultant at Centre for Public Policy Research. Views are personal and does not represent that of CPPR
[1]http://www.livemint.com/Politics/aLOL6JxQIWVuO0ZYYFkuoN/Kerala-proposes-fat-tax-on-burgers-pizzas.html
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