Taxing junk food doesn't affect the poor, in fact it helps them avoid diseases: Study

Does increasing the tax on fast food affect the poor people in India? Not really, says a new study conducted by Lancet, an international medical journal. In fact, the study – which focuses on several countries including India – says that a higher tax on junk food actually helps lower income groups lead a healthier life, and stay safe from non-communicable diseases like heart issues, cancer, and diabetes.

The study, which was conducted on non-communicable diseases (NCDs) and economics showed that poverty drives and is driven by NCDs, but financial protection from high medical costs can help break this cycle.

The study was conducted by the Lancet Taskforce, an official partner of the WHO Independent High-level Commission on NCDs.

NCDs like cardiovascular diseases, cancer, and chronic respiratory diseases and diabetes are a huge financial burden on the poor and affect them disproportionately. The study says: "poverty drives and is driven by NCDs, but that financial protection from high medical costs can break this cycle; price policies and taxation are effective means to reduce NCD risk factors, such as tobacco and unhealthy diet, and can reduce inequalities; and that investment in NCD control results in increased economic growth."

So what does this mean in a state like Kerala, which has the highest number of people living with diabetes in India?

Kerala's fat tax

In 2016, Kerala became the first state in India to impose a fat tax on fast food. At the time, while the government did not explain the rationale behind its move, it was assumed to be due to the state's climbing obesity rates. The 14.5% fat tax, which was introduced with the aim to curb the growing addiction to junk food, was met with a mixed response.

However, the introduction of GST across India has meant that Kerala’s fat tax was brought to a screeching halt.

Rajeev Sadanandan, Kerala’s Additional Chief Secretary (Health) and one of the experts who supported the high-level commission on NCDs, says, “Initially, when we brought in the fat tax, our plan was to start with the obvious unhealthy food that brings the least resistance from the people. We wanted to slowly scale it up and include sugary beverages later. But, all the plans are lost now because of the GST.”

According to him, the central government should look at taxing unhealthy food and beverages just the way they tax alcohol and tobacco.

“Incentives should go in both directions. There should also be positive incentives to the sellers and vendors for stocking up and selling healthy food. Price policies should accommodate that as well,” adds Rajeev.

However, Dr Asma Rahim, professor and head of the Department of Community Medicine at the Government Medical College, Manjeri, says that the fat tax did not have much of an impact on low income families.

“The fat tax introduced by the Kerala government increased the revenue for the government. But other than that, there was no significant benefit for healthcare brought by the fat tax in Kerala. Since this tax was targeted at big corporate food chain companies, which mostly the middle and upper-class people go to, the low-income people were not affected by it,” she says.

According to experts, Kerala has a high usage of saturated fat in regional cuisine, which is just as bad as the trans fats found in junk food. If low-income groups are to benefit from fat tax, the policymakers need to address the use of saturated fats as well.

Price policies do not have regressive financial effects

industry stakeholders have always held the view that high tax policies by the government can have regressive financial effects, especially on the poor. However, the study by the Lancet Taskforce shows that the situation is otherwise.

“The finding is that price policies will affect a larger number of high-income than low-income households, and the absolute increases in expenditure involved will be largest for high-income households. This is because the prevalence of consumption of and the expenditure on alcohol, soft drinks, and snacks increase consistently with household income. This is also true for expenditure on tobacco products,” the study says.

Dr Asma also echoes this sentiment and says that taxation on tobacco products must be uniform.

“There should be uniform taxation for all tobacco products in India. Here, cigarettes are taxed higher than beedis. Hence the low-income group has a high dependence on beedis. As long as taxation is not uniform for all tobacco products, nothing much can come out of the pricing policies,” she added.

In fact, people from low-income groups will have a stronger response to price changes and for the very same reason, their consumption of unhealthy products decreases. This, in turn, will prove beneficial in the long run to bring down the NCDs among the poor. The health benefits are more for the poor than the rich.