IEA releases report on how much increased sin taxes could inflate the cost of food
The secret meeting at a five star hotel in Geneva, organised by billionaire Michael Bloomberg and the World Health Organisation (WHO), is set to drive governments all over the globe to dramatically increase ‘sin taxes’ on food and drink that they deem to be unhealthy.
The WHO claims that a 20 per cent increase in the price of fizzy drinks would decrease consumption by 20 per cent and improve health despite there being no international evidence that sugar taxes have reduced obesity. This follows calls from campaigners such as Jamie Oliver for the UK’s sugar tax to be extended to milkshakes, coffee and food.
A new analysis by the IEA’s Head of Lifestyle Economics, Christopher Snowdon, shows that a 20 per cent tax on the food and drinks that the WHO considers ‘ unhealthy’ would cost a typical British family £458 extra per year. This is a cumulative cost to the economy of as much as £12.4bn each year.
• The WHO’s definition of ‘unhealthy’ food arbitrarily defines food and drink deemed high in fat, sugar, salt or calories. This could mean tax rises for consumers of milk drinks, breakfast cereals, confectionery, baked goods, yoghurts, crisps, bread, soup and lunchbox staples such as sliced ham.
• The regressive natures of sin taxes means that in Britain people in the poorest decile already spend 34 per cent of their disposable income on indirect taxes.
• Last month at the World Bank/IMF Spring Meeting, Bloomberg admitted his prescriptions will fall most heavily on the poor but claimed it’s for their own good. But there is no evidence from anywhere in the world that taxes of this kind work.
• Sin taxes are a reliable source of revenue precisely because – for the most part – they simply raise the cost of living. Whilst they are intended to reduce consumption of demerit goods and indirectly improve health, the products being targeted are price inelastic, meaning consumers will be forced into paying more for their food and drink.
• The effect will be similar in the United States, where a family that follows the US Department of Agriculture’s guidelines for a healthy diet on a ‘moderate’ budget and enjoys one bottle of wine and one six-pack of craft beer per week will be hit with an increased shopping bill of $612.
• Italians will be paying €547 more per year; Irish families, €607. And the impact in poorer countries will be even more punishing because families spend a higher percentage of their disposable income on feeding themselves.
Commenting on the briefing, Christopher Snowdon, Head of Lifestyle Economics at the Institute of Economic Affairs, said:
“The meeting this weekend might be deliberately behind closed doors, but we know what it’s about. It is a planning session organised by the richest of the rich for a global assault on the poor. Billionaire Mike Bloomberg seems determined to use his twilight years conducting a warped social experiment to make poor people behave better.
“Taxing the groceries of ordinary families will only succeed in making them poorer, when all the credible evidence shows that the best way to improve health is to make people richer.”
Notes to editors:
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The Institute of Economic Affairs has calculated the impact on household consumption in four countries where consumption data are available.
In the UK: For food, non-alcoholic beverages, and alcohol, we have calculated the impact of a 20 per cent tax on current consumption of potentially taxed categories as reported by the UK Office for National Statistics. For full details see page 5 of the attached report.
To download the briefing, ‘The impact of World Health Organisation food and drink taxes on a typical household’, click here.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
Further IEA Reading: Aggressively Regressive: The ‘sin taxes’ that make the poor poorer