EDITOR'S INSIGHT: Why food taxes don't cure obesity

Food taxes to change people’s eating habits please economists and policymakers but make lousy politics.

Rarely a week goes by without some academic or public health official urging a tax on sugary drinks or fatty food.

Some countries and cities have even enacted them, only for them to be overturned or reversed.

The latest is Mexico, which is labelled as being one of the world’s most obese countries along with the US and New Zealand.

The Mexican government has decided to impose a sales tax on food and medicines as part of some fiscal reforms aimed at boosting weak state revenues.

But widening the value added tax (VAT) to include food and medicines has proved politically impossible, given the impact on the poor, who make up roughly half of the population.

It was also argued higher taxes would drag on the economy, which threw up a surprise contraction in the second quarter.

A ban on large sugary drinks failed in New York and a referendum in California to favour a fat tax also failed.

Denmark tried, too, but lifted the tax when fast food-addicted Danes went across the border to buy it in Germany.

But one country, Finland, has successfully imposed a tax that makes soft drinks, chocolate, sweets and ice cream more expensive.

The result has been the disappearance of Mr Whippy-style ice cream trucks that were once a feature of the short summers in Finnish suburbs and villages.

The tax added 95 euro cents ($1.55) to every kilogram of ice cream, resulting in whopping 20% drop in consumption since 2011.

That led the two dominant ice cream companies, Unilever and Nestlé, to cancel their contracts with the delivery drivers.

It helps that Finland is remote from other countries and the effects of cross-border trade are limited compared with other European countries that have tried to make junk food and drinks more expensive.

The tax advocates also point to the success of higher taxes on cigarettes as a deterrent to smoking as well as on alcohol.

The World Health Organisation, for example, has urged member countries to consider taxing unhealthy foods and subsidising healthier choices.
It cites the example of Denmark, where the price of butter was pushed up 30% before the government was forced to back down.

But generally speaking, the food and beverage industry has cast doubt on taxes alone as a means of altering consumer behaviour.

Meanwhile, companies such as Coca-Cola and McDonald’s have countered with defensive campaigns to highlight the benefits of choice and say their products should be consumed in moderation as part of a healthy and active lifestyle.