Food taxes and subsidies could improve health – experts respond

Taxes on fizzy drinks and foods high in saturated fats and subsidies for fruit and vegetables could lead to better diets and improve overall population health, according to a study from New Zealand experts.

Researchers from the University of Auckland and the University of Otago, Wellington conducted a comprehensive review of modelling studies investigating the association between food pricing strategies, food consumption and chronic diseases. Their results are published in the open-access journal Public Library of Science (PLOS) Medicine.

Combining data from 32 countries, the authors’ model predicted a 0.02% fall in energy intake from saturated fat for each 1% price increase. Similarly, a 10% increase in the price of soft drinks could decrease consumption by 1% to as much as 24%. In contrast, the authors found that a 10% decrease in the price of fruits and vegetables could increase consumption by between 2% to 8%.

However, the authors found evidence to suggest that such a subsidy might result in compensatory purchasing with people buying less of other healthy products, such as fish, or more of less healthy products (e.g. sugar), which may not be beneficial to health overall.

The authors also found that studies that compared food pricing strategies by socio-economic group estimated improved health outcomes for those on lower incomes, which may be relatively greater than for those on higher incomes. This suggests that food pricing strategies also have the potential to reduce inequalities.

The Science Media Centre rounded up the following comments on the research from experts in nutrition, economics and public health.

Prof Boyd Swinburn MBChB, MD, FRACP,Population Nutrition and Global Health,University of Auckland and Director, WHO Collaborating Centre for Obesity Prevention, Deakin University, Melbourne comments:

“My take on the issue of food taxes and subsidies is as follows:

  • The contribution of unhealthy diets to ill health in New Zealand is now greater than that of tobacco, so improving diets needs to be taken far more seriously than it is at present.
  • The diet of the population is highly dependent on the nature of the food environment, especially the price of food.
  • If the government is serious about improving population nutrition then the experience with successes from tobacco and alcohol taxes is  highly relevant.
  • The two most promising strategies for New Zealand are to remove the GST on fruit and vegetables (as is the case in Australia) and apply an excise tax to sugar sweetened beverages (as is the case in several countries and states in the US).
  • Taxes on saturated fat are more problematic logistically and politically (because of the pressure from the food industry) and they may not deliver as much in health gains if people shift to other unhealthy products like high salt foods.
  • While food taxes have the potential to be regressive, fruit and vegetable subsidies (or removing GST) and the health impacts are progressive and (as with tobacco and alcohol) the decision to implement fiscal policies needs to take this wider perspective.
  • Judging by the heavy-handed response from the food industry in the US, there is likely to be enormous pressure on governments from the food industry not to apply taxes on unhealthy foods, and the track record of successive governments on food policies has been that they favour food industry profit interests over public health interests.
  • Public polls show support for taxes on unhealthy foods if the funds are used to subsidise healthy foods or are used for health promotion purposes.”

Prof Elaine Rush, Nutrition, Faculty of Health and Environmental Science, AUT University comments:

“What we eat and why we eat certain foods is very complex. We know that fat and sugar are two of the most pleasurable parts of the diet in terms of taste. Foods that contain fat and sugar tend to be processed, energy dense and nutrient poor. Taxes on soft drinks and foods high in saturated fats and subsidies for fruit and vegetables could lead to beneficial dietary changes and potentially improve health but we do not know how much this will change food choice and whether the changes will be associated with an improvement in the nutritional quality of the diet.

“In a very comprehensive and thoughtful review of evidence from OECD countries, this study looks at what is known from simulations of changes in pricing, taxes and subsidies and the predicted effects on consumption. There are of course many assumptions and unknowns in these simulations but they are the best evidence we have.

“The authors conclude that based on the modelling studies taxes on carbonated drinks and saturated fat and subsidies on fruits and vegetables would be associated with beneficial dietary change, with the potential for improved health. Furthermore, certain pricing strategies were more likely to lead to improved health outcomes for those on lower incomes than for those on higher incomes. This suggests that food pricing strategies also have the potential to reduce inequalities and in particular for pregnant mothers and children there could be huge benefits.

“While the authors suggest that more research is needed I would challenge food producers, manufacturers and retail outlets to improve the availability, cost, and formulation of foods and use their considerable marketing skills to drive a change to the food supply NOW. There is no shortage of nutritious food but it does not get to the mouths of those most in need. We know eating whole fruit and vegetables, protein, dairy products and whole grains improves health and productivity and the earlier in life the bigger the potential improvement.”

Assoc Prof Winsome Parnell, Human Nutrition, University of Otago, comments:

“While this is a very careful piece of work, and one which it is important to do, the authors themselves state that: 1) the quality of the research reviewed was not of high quality; 2) the cost-effectiveness and pragmatic issues associated with food pricing strategies must also be addressed.

“There is evidence (and they note this) for ‘compensatory purchasing’, i.e. unintended consequences of applying food pricing strategies. For example, if carbonated drinks are taxed, then there are non-carbonated but equally ‘sweet’ drinks available to choose from.

“Reference is made to taxes applied in Denmark (to fats). I understand that this has been discontinued.

“Consideration needs to be given to the fact that pricing of foods is not easy to control. With fruits and vegetables there is the huge issue of seasonal fluctuation and the effect of the weather/season…which could over-ride planned price adjustments. Care would be needed that ‘growers’ did not bear the burden of changes in pricing strategies and simply go out of production.

“In NZ we have had relative increases in the prices of dairy fats (butter and cheeses and milks) in the last decade which should enable some monitoring of the effect of increased prices on consumption.”

Dr Eric Crampton, Senior Lecturer in Economics, University of Canterbury, comments:

“Taxes and subsidies to encourage healthy eating are notoriously difficult to administer in the real world. They’re the kind of thing that sounds simple, but wind up being a bit of a compliance nightmare.

“Why subsidise fresh vegetables while ignoring frozen or canned vegetables, which are just as nutritious and favoured by poorer cohorts? Where then do we draw the line between a frozen unprocessed product and one that’s too processed to count any longer? If minted peas count, where do we draw the line between a frozen vegetable and a processed food product? I’m reminded of a recent Australian case where a judge had to decide whether a mini-ciabatta counted as bread (GST-exempt) or as a cracker (subject to GST). The food importer flew in a bread expert from Italy as a witness in the case. These kinds of systems lead companies to find strong tax advantage in having their products being declared compliant. The accountants, lawyers and bread-deciders can do well out of it, but that’s not necessarily to the national advantage. Denmark recently abandoned its one-year-old fat tax because of the administrative burden it placed on Danish firms.”

“The paper finds a ten percent increase in the price of soft drinks via a soda tax would reduce soda consumption by 9.3 percent but would only reduce overall energy consumption by 0.2%. People who want to consume sweet things shift away from taxed sweet things to less-taxed sweet things.”

“The paper focuses on the effects of tax and subsidies intended to affect consumer behaviour. Another way of tackling the problem is to look at how consumer behaviour changes with other changes in the relative prices of healthy and less healthy foods. Jonah Gelbach, Jon Klick and Tom Stratmann used American data from 1982 to 1996 to see whether changes in the relative prices of healthy and unhealthy foods over time across U.S. regions affected obesity rates. Because overall food prices vary by a lot more than any real world fat tax, their study gives us a way of examining what can happen with very large price increases. They found that the relative price of healthy food really does little to determine overall obesity rates. While we should not expect large health benefits from fat or sugar taxes, the administrative costs are real and substantial.”