Is Kerala’s fat tax a mere topping than health initiative?



Kerala’s bold step to levy fat tax on certain junk food items appears to mirror the Denmark example.

In a bold step that might have a positive impact on public health, Kerala has become the first State in the country to introduce a 14.5 per cent tax on burgers, pizzas, donuts, sandwiches and pasta sold through branded restaurants. Introducing additional tax on fat-rich food products has been tried out in other countries with varying degrees of success. Where Denmark has failed, will Kerala’s experimentation succeed?

The answer to that question depends on what the objective is. Unfortunately, the rationale behind the move has not been spelt out except that it will bring in additional Rs.10 crore to the government’s coffers.

There is a strong case to bring in several measures to tackle the burgeoning waistline of school children and adults in Kerala. For instance, a June 2012 study (Indian Pediatrics) of 1,634 children between 6-15 years from three urban schools in Kochi, Kerala, found the prevalence of obesity among boys to be 3 per cent and 5.3 per cent for girls and the prevalence of overweight was 10.2 per cent in boys and 12.1 per cent in girls. An April 2014 study of 1,098 school children in the rural areas of Kochi district found 9 per cent of girls and nearly 6 per cent boys were overweight while 2.8 per cent girls and 3.3 per cent boys were obese.

Levying a tax on calorie-rich, unessential food items and beverages has been the preferred route to rein in consumption of unhealthy products and as a means to change consumer behaviour in some developed countries. Hungary taxes food high in fat and sugar, France taxes soft drinks and Mexico levies tax on junk food and sugar-sweetened beverages, while 34 U.S. States and the district of Columbia have food taxes that affect sugar-sweetened  drinks.
The food items have not be chosen based on energy density or fat content threshold. So,  numerous high calorie, fat-rich food products have been left out.

In October 2011, Denmark became the first country in the world to introduce a tax on saturated fat. Tax was levied on all foods that contained more than 2.3 per cent fat, including milk, butter, cheese, oil, and meats, as well as frozen pizzas and other processed foods. However, it was repealed by the end of 2012 even before tax on sugar-sweetened beverages could be introduced. Similarly, in Mexico, where prevalence of overweight and obesity is over 33 per cent in children and about 70 per cent in adults, 8 per cent tax was introduced on all nonessential food items with energy density of more than 275 kcal/100 g and 10 per cent on all sugar sweetened beverages since January 2014.

In contrast, the focus in Kerala has been only a few calorie-rich, nonessential food items for additional taxation and is not based on any cut-off energy density or fat content. As a result, numerous energy-dense, fat-rich food products have been left out. It is also surprising that sugar-sweetened beverages have been excluded from the list of taxed products. In January 2016, the World Health Organisation had urged governments to levy additional taxes on sugar-sweetened beverages to end childhood obesity.

According to a study (Health Policy, June 2015), in Denmark, the fat tax was considered as a “source of funds for the tax reform rather than a public health initiative”.  The taxation rate was “adjusted to yield certain tax revenue rather than a certain health benefit,” the tax did not reflect the actual content of saturated fat in a product and the tax was processed by the Ministry of Taxation and not the Health Committee. Still, consumption of saturated fat items reduced by 10-15 per cent due to the tax (Food Policy, October 2013); an April 2016 study pegs the reduction in intake at 4 per cent. Kerala’s case seems very similar to that of Denmark.

On the other hand, Mexico has shown that a well-thought-out strategy focussing primarily on reducing unhealthy food consumption can yield rich dividends. During the first year of taxation in 2014, a January 2016 paper in the medical journal BMJ says that there was a 12 per cent reduction in sugar-sweetened beverages intake, while a PLOS Medicine study (July 2016) noted a 5.1 per cent drop in the consumption of energy-dense food items.

Results from Mexico also show that while no change in consumption pattern was seen in high socio-economic status households, a 10.2 per cent and 5.8 per cent reduction in the consumption levels was seen in low and medium socio-economic status households respectively. This is not surprising as low-income populations are more sensitive to price changes. However, in the case of Kerala, the prime target is the middle and high socio-economic households. Still, in all probability, the exercise will bring about a change in the consumption pattern as the fat tax is way higher than even Mexico’s.

The outcome of Kerala’s exercise will be keenly watched by other States. The war on obesity and many chronic health diseases caused by fat-rich food intake can be won if Kerala can pull it off by undertaking certain mid-course corrections and not go the Denmark way.