Australian Tax Forum - Why a fat tax isn't the answer to obesity

Denmark has become the first country to introduce a "fat tax" - an extra tax on food with a saturated fat content above 2.3%.  You can read more about it in The Washington Post, and there are plenty of other newspaper articles about it at the moment.  This comes at a time when Australia is having a national Tax Forum, following on from the tax review ("Australia's Future Tax System" - aka The Henry Review) that was released last year.  Personally, I think it is another case of more talk no action, but we'll see.

My PhD is in tax, so I could write a lot about the Forum, but this isn't a tax blog.  However, since my blog is about trying to lose weight/getting healthier, the "fat tax" is something I did want to talk about.

With the tax being introduced in Denmark, and the current Tax Forum underway, there have been some calls to introduce such a tax in Australia, in order to combat our obesity rates.  Personally, I don't think such a tax should be introduced - there are a number of reasons, but just a quick disclaimer - these are just 'thoughts' I have had, obviously they would be researched a lot further if I was writing an academic paper rather than a blog post!

• It's another tax: Okay, so this is an obvious point, but the Henry Review identified 125 taxes that currently exist in Australia.  The last thing we need is another one.  Also, we already have a tax on "processed food" in the form of the GST.  I have previously written an academic paper looking at whether the GST should be on ALL food rather than processed food (my argument being that having exemptions makes the tax system more complicated).  Similar complications would arise if we introduced a fat tax.  What food do we put it on.  Denmark has used saturated fat content, but why is is 2.3% the magic number?
• Is saturated fat making us fat?  Obviously, it isn't healthy to eat a diet high in saturated fat.  But you could eat a diet low in saturated fat and still be overweight/obese.  Some people argue that sugar is the enemy.  Should the tax be on high sugared food?  You put on weight when your calories are too high, regardless of how you get them. 
• Exercise: There is no way for the tax to account for the fact that some people may eat these foods and then burn off the calories by exercising or highly physical jobs. 
• Won't change behaviour: There has been research (some of it is mentioned in the Washington Post article I linked), that a fat tax would have to be much higher than the Denmark tax to change behaviour.  In Denmark, a price of a hamburger will rise $0.40.  That's not much.  I know in the US there are arguments that low-socio-economic groups eat high fat foods (in the form of fast food)because they are cheaper, but this isn't the case in Australia.  Fast food isn't cheap. Yes, it's cheaper to go to McDonalds than a 5-star restaurant, but it is still cheaper to cook for yourself.    
• Use of funds: If a fat tax was introduced, where will the funds go?  Into general revenue.  It wouldn't be set aside for weight loss programs, to encourage people to exercise, the health system, etc.   At the end of the day, it really is a penalty tax, with no clear evidence to show that such a penalty will change behaviour.