Levy 20-30% health tax on food high in sugar, salt, fat: study

Subject: Economy

Section: Fiscal Policy

In the news:

Public health researchers recommend implementing a health tax ranging from 20% to 30%, in addition to the Goods and Services Tax (GST), specifically targeting sugar, sugar-sweetened beverages (SSBs), and foods high in sugar, salt, and fat (HFSS). This initiative aims to curtail excessive consumption of these items.

Details:

The proposed tax primarily focuses on bulk purchasers such as confectionery and sweet manufacturers, aiming to decrease their demand for sugar.
This strategy intends to influence consumption patterns at the production level.

Impact of these taxes:

Applying the concept of Price Elasticity, researchers anticipate a 2% reduction in demand among regular consumers for every 10% increase in sugar prices.
However, for bulk buyers, a higher price elasticity suggests a potential 13-18% decrease in demand with a 30% tax increase over the existing 18% GST.
Similar tax increments of 10-30% on sugar-sweetened beverages could result in a demand decline between 7% and 30%.
For HFSS products, the anticipated decrease in demand ranges from 5% to 24%, correlating with tax variations.

Revenue and Health Outcomes:

Besides potentially reducing consumption, these heightened taxes could significantly boost government revenue by 12-200%.
The overarching goal is to mitigate health concerns associated with excessive sugar intake, including obesity, diabetes, and related health issues prevalent in India and globally.

Global Taxation Trends:

Over 70 countries have implemented similar taxation strategies on sugar, SSBs, and HFSS products.
These initiatives have showcased promising outcomes in terms of decreased consumption and improved public health in various regions, including Mexico, Chile, Saudi Arabia, Argentina, and South Africa.

India’s Sugar Consumption Challenge:

India holds the title of the world’s largest sugar consumer, leading to substantial health challenges.
Global average consumption of sugar is 22 kg per person per year, an average Indian consumes 25 kg per year.
The current sugar intake exceeds the World Health Organization’s recommended threshold (no more than 50 grams of sugar per day), indicating a pressing need for interventions to address rising health issues linked to excessive sugar consumption.

Key terms:

High Fat Sugar Salt foods (HSSF) are known for their negative impact on health.
A negative externality is something that impacts a person or people who are uninvolved in a situation. Example: Smoking cigarettes or burning coal.
Internalities: Harm caused to individuals due to limited understanding influenced by marketing.
Non-regressive Tax: A tax that does not disproportionately burden lower-income individuals.