Australia Fat Tax Essay

Australia is now considered as one of the most obese countries in the world, with 63% of Australians being either obese or overweight1. To counteract this, there has been speculation over whether to introduce a fat tax. This tax would specifically target foods high in fats and sugars, such as; soft drinks and deep fried takeaways. The logic behind such a tax is that an increase in price would lead to decrease of demand similar to that of the alcohol and cigarette taxes respectively, in order to improve our country’s health as a whole. The advantages and disadvantages of the fat tax can potentially help foresee the effect on the Australian economy. The effectiveness and consequences are also aided by the views gained from the implementation
of a fat tax by the Danes in 2011.
With Australia’s current federal debt at two hundred and forty seven billion dollars , the added burden of twenty one billion dollars a year of debt from diseases associated with unhealthy foods1 being decreased would be a welcomed relief to the federal government. This coupled with the influx of tax revenue from a successfully implemented fat tax would lead to a hefty sum of tax payer money of which the government can use. The advantages of this to the Australian economy would be immense as the money would hopefully go to funding the agricultural section. Australia’s agriculture section, in accordance with Australian Bureau of Statistics contributed $48.7 billion dollars towards Australia’s total gross domestic product (GDP) . The added government stimulus from the fat tax could contribute greatly to increasing the GDP. The stimulus would help conquer the water shortages farmers face every year, as well as increasing efficiency enabling the purchase of modern agriculture capital, hereby increasing economic efficiency. This increase in agricultural revenue could have a positive effect on jobs as farming becomes a more financially appealing career choice. However, consequences of this could be a decrease in jobs elsewhere such as in fast food restaurants as profits being to decrease from the rise of prices due to the fat tax. This could also affect Australia’s other economic sections such as the business or education section as funding may be retracted from them as the Government focuses primarily on the health section. Economic efficiency would also be at risk as the increase of resources would require a higher threshold of transportation either across the country and worldwide. This may cause a bottleneck effect and wastage of resources may occur, such as trains full of fresh produce waiting weeks to be emptied because Australian ports simply do not have to capacity to fill so many ships at a time.
To further question the effectiveness of the fat tax, examples can be sourced from the implementation of a similar tax in Denmark.
In October 2011 Denmark introduced a tax on items with over 2.3% saturated fat . It was then quickly abolished in November 2012 as it didn’t change Danish eating habits. It had a negative impact on the Danish economy as “48% of Danes were travelling across the borders to Sweden and Germany in order to purchase junk food”3. Butchers also caught the full blow of the tax opposed to large supermarket chains as “supermarkets could keep meat prices down by spreading the tax across other goods, but small butchers sold only meat. This meant higher prices and lower
sales.”3.
Additionally, the Australian government could also seek help deciding whether or not to implement this tax from the success of both the tobacco tax and alcopops tax. In terms of effectiveness, according to Sally M Dunlop of the Medical Journal of Australia, the tobacco tax “… has been identified as the most effective single intervention to reduce demand for tobacco” . Similarly, the tax on alcohol, more specifically alcopops, was equally efficient in the decrease of demand for the certain product. As of March 8th 2009 the sale of alcopops dropped by 29% according to Julian Drape of the Age; "This independent data is irrefutable and unbiased, and demonstrates a big loss in spirits sales for the liquor industry". This provides some support towards to levying of the fat tax as there have been past examples of taxes being effective in reducing the demand for unhealthy products.
Jane Martin, the Executive manager of Obesity Policy Coalition, states that “a combo of a tax and social marketing are the most effective way of the government combating obesity”, but perhaps this is not quite ethical of the government to decide what consumers eat and what they spend money on.
It is a intrusion on consumers right of purchasing. Furthermore, the price increase would not only effect the overweight and obese, but also healthy individuals who partake in the consumption of junk food. Instead of punishing the overweight, the government could reward the healthy with things such as “tax breaks on gym memberships” . Moreover, the possibility that the revenue from the fat tax would not go to improving the health system or subsidising healthy food so it is a cheaper
option.
In conclusion, the economical effectiveness of the fat tax can be measured by the influx of revenue to the government, an increase of contribution in GDP by the agricultural section and past successes of both the tobacco and alcopops tax. The economic consequences are a bottleneck effect causing economic efficiency to drop, misallocation of the revenue from the tax, small businesses such as butchers losing customers due to increased price. A solution is possibly instead of creating another tax for overweight people, reward those who are healthy with tax rebates on gym memberships, or make healthy and organic food a cheaper option.

Bibliography:
Australian Bureau of Statistics, 2013, viewed 30/4/2013 and 1/5/2013: http://www.abs.gov.au/ Sally M Dunlop, Trish F Cotter and Donna A Perez, 2011, ‘Impact of tobacco smoking in Australia on short term smoking cessation: a continuous tracking survey’, viewed on 30/4/2013: https://www.mja.com.au/journal/2011/195/8/impact-2010-tobacco-tax-increase-australia-short-term-smoking-cessation The Economist, November 17th 2012, Copenhagen, ‘Denmark’s food taxes – A Fat chance’, viewed on 30/4/2013 http://www.economist.com/news/europe/21566664-danish-government-rescinds-its-unwieldy-fat-tax-fat-chance Action on Smoking and Health Australia, 2010, ‘Taxation and funding the fight against tobacco’, viewed on 1/5/2013 http://www.ashaust.org.au/lv3/action_funding.htm Julian Drape of The Age, March 8 2009, ‘Alcopops tax a success; research’, viewed on 1/5/2013 http://news.theage.com.au/breaking-news-national/alcopops-tax-a-success-research-20090308-8sa7.html Lucy Kippist, November 12 2012, ‘Will the fat tax work for Australia?’, viewed on 29/4/2013 http://www.news.com.au/lifestyle/health-fitness/copenhagens-out-will-the-fat-tax-work-for-australia/story-fneuzkvr-1226515115543 Michael Jarosky of the Sydney Morning Herald, November 14 2012, ‘Fat tax – fat chance?’, viewed on 1/5/2012 http://www.smh.com.au/executive-style/fitness/blogs/boot-camp/fat-tax--fat-chance-20121114-29bzu.html Yannis Goutzamanis of Economic Student Society of Australia, March 11 2013, ‘Fat tax: will it go belly up?’, viewed on 28/4/2013 http://economicstudents.com/2013/03/fat-tax-will-it-go-belly-up/ Tejvan Pettinger, March 10 2012, ‘Pros and Cons of fat tax’, viewed on 28/4/2013 http://www.economicshelp.org/blog/5056/economics/pros-and-cons-of-fat-tax/ Amy Bainbridge of the ABC, February 20th 2013, ‘Fat tax won’t pop our ballooning obesity epidemic’, viewd on 27/4/2013
http://www.abc.net.au/news/2013-02-20/bainbridge-a-fat-tax-wont-stop-obesity-epidem/4529014