In India, there has been a growing burden of overweight and obesity over the past three decades. National Nutritional Monitoring Bureau survey 2017 on diet and nutritional status of urban population in India found that more than half of the adults were overweight and obese.5 On seeing such a rapid rise in the burden of obesity, Government of India has set the target of halting the obesity epidemic by 2025 under the ten targets in National Action Plan for Prevention and Control of Noncommunicable diseases. To achieve this target, action points suggested were development and implementation of policy measures to reduce the use of saturated fats and transfats by food producers and processors. One policy measure that has been tried and tested in many countries was the introduction of fat tax. A ‘fat tax’ is a specific tax placed on foods which are considered to beunhealthy and contribute towards obesity. The tax could be placed on foods high in sugar/fat, such as crisps, chocolate and deep-fried takeaways.
Thus, a fat tax is a tax or surcharge that is placed upon fattening food, beverages or on overweight individuals. It is considered an example of Pigovian taxation. A fat tax aims to discourage unhealthy diets and offset the economic costs of obesity. A fat tax is a kind of tax that is liable on junk foods and street foods that lead to body-related problems and increase body weight. The surcharge is collected on the basis of selected foods that are responsible for increasing the weight of an individual. The main purpose of imposing the fat tax is to discourage the consumption of unhealthy diets. Studies has revealed that even a 1% per ounce tax on beverages may reduce consumption by 25 per cent. The major purpose of applying Fat tax is to decrease the net consumption of unhealthy food causing obesity. The basic idea is to fine those food item that are harmful to heart and body. Consumption of junk cuisine sold by major brand chains increases the chances of diabetes and other health problems. Public health effect of fat taxation Increasing the taxes for unhealthy junk foods should encourage the people to take healthier food options like fruits and vegetables especially among younger adults. Apart from health, another important effect is its contribution to country’s economy.
Price policies will affect large number of high income rather than the low income households, and the absolute increases in expenditure involved will be the largest for high income households. This is because the prevalence of consumption and the expenditure on alcohol, soft drinks, and snacks increases consistently with the household income.17Another benefit associated with the taxation is the generation of revenue which can be used for various health initiatives and programmes to prevent obesity, support improvement of nutritional status and food quality and encourage the practice of physical activity. International Scenario Historically, the tax was introduced in October 2011 by Denmark. Other countries such as Finland, the UK, France, and Hungary have imposed sugar tax on sugar-sweetened beverages Denmark was the first country in the world to introduce fat tax on October 2011 with an aim of reducing the burden of cardiovascular disease.
The imposition of value added tax (VAT) in Canada and Europe and sales taxes in the United States on food has shown certainty that even smaller taxation can help generate higher revenue for the country. Berkeley city in California, USA has also introduced taxation of sugar sweetened beverages. The Indian Scenario The “fat tax” will be liable for the junk foods sold through multinational food chains like Pizza Hut, and McDonald’s. In the budget of July 2016, the Finance Minister of Kerala introduced the fat tax to the public. The fat tax was an indirect tax of 14.5% levied on burgers, pizzas, tacos, doughnuts, sandwiches, pasta, and bread fillings sold by restaurants with a brand name or registered trademark. This taxation was based on the type of restaurant instead of ingredients or specific food products, which were the usual basis in other countries. Gujarat is the second state to implement fat tax. The decided percentage would be 14.5 if levied and the revenue generated by this action will be definitely invested in the development of healthcare facilities in the state of Gujarat.
Similarly, in 2019, The FSSAI banned the sale and advertising of junk food in and around 50 metres of school premises. Kitchens and canteens in schools now need a license from FSSAI to operate. The Food Safety and Standards Authority of India (FSSAI) is cutting down on the sale of junk food to students whether it is in the cafeterias and canteens or in the area around schools. The sale or advertisement of unhealthy food has been prohibited inn a 50-metre radius around school premises. NITI Aayog has righly pointed out that India can take actions such as taxation of foods high on sugar, fat and saltand front-of-the pack labelling to tackle rising obesity in the population. The Aayog in the report mentioned that the incidences of overweight and obesity are increasing among children, adolescents and women in India. There are many actions that India can take, such as front-of-pack labelling, marketing and advertising of HFSS foods and taxation of foods high in fats, sugar and salt. Non-branded namkeens, vegetable chips and snackss attract 5 per cent GST while for branded and packaged items, the GST rate is 12 per cent. According to the National Family Health Survey (NFHS-5) 2019-20, the percentage of obese women increased to 24 per cent from 20.6 per cent in 2015-16, while the percentage for men rose to 22.9 per cent from 18.4 per cent four years earlier. Benefits of Fat Taxation Revenue: The government can raise substantial sums of money. Therefore, a fat tax could be revenue-neutral (no overall increase in tax revenue).
Alternatively, the money raised from ‘fat tax’ could be used to spend treating health costs of obesity. Social Effect: A fat tax would make people pay the social cost of unhealthy food. Consumption of fatty foods have external costs on society. For example, eating unhealthy foods contributes to the problem of obesity. The imposition of fat tax may lead to a positive impact on individuals which in turn motivates the society to lead a healthy life. Challenges in introduction of fat taxation throughout India Food selection: Difficult to know which foods deserve a fat tax. e.g. cheese has high-fat content. Many foods could contribute to obesity if consumed in sufficient quantities. Tax Debate: The debate during the imposition of fat taxation were whether this taxation intended to reduce the burden of obesity across the state or country and change the consumption habits of the population or to generate additional revenue for the government through taxation or both. In competitive market conditions, incidence of taxation depends on relative price elasticity of the demand and supply of the products that are being taxed. Regarding the supply side, producers of the taxed fast food may not fully pass on the entire burden of taxation to the consumers.
Ethical problems: An ethical question may arise that if restricting particular food products from the consumers through taxation is ethically acceptable or not. Implementation: The introduction as well as the implementation of fat taxation is a tricky area as it may involve various controversies. A thorough understanding of the societal needs and patterns should be studied before the implementation of the fat taxation. The way forward Creating awareness and health speciality programs by the Government is the key to reduce the intake of unhealthy food. Fat taxation alone will not have significant impact on the population’s consumption habits, hence fiscal interventions are required to form an extensive strategy in public health nutrition which is more effective than the sole intervention. Better accessibility to healthy foods may play a pivotal role in minimizing the habit of consuming unhealthy food items. Fat tax should the means and changing the unhealthy habits of the people should be the end. Even though the implementation of fat tax may seem difficult but when implemented it can positively affect the lives of the people. Hence the implementation of fat tax should be seen as a next generation in this fast moving world.