More calls for taxes on food – FGC media response

7 July 2015

The NZ Herald asked for comment on the research paper out of Auckland University which recommended both a combined food tax and subsidy option and also a greenhouse gas tax option.

Katherine Rich’s response was:

The academic paper’s suggestion of new tax ideas on meat, dairy and chicken for climate change reasons will surprise Herald readers. In the past two years the two universities (Otago and Auckland) have called for new food taxes on salt, fizzy, sugar generally, fat, and now yet another 20% tax on producers of cheese and other dairy products, meat and poultry – all in the name of climate change. 

Their computer modelling might look sophisticated and compelling in theory, but it’s a computer model. What happens in real life will be completely different.

They seem to think the government can tax here or subsidise there and New Zealanders are suddenly going to do all the right things. Implement their wish-list of taxes and the government tax take will be massive as Kiwis pay more each week for their groceries.

This is a limitation with these sorts of academic studies. This study assumes small changes in price will make people eat more of certain products. For the person who doesn’t eat enough fruits in vegetables, small changes in price from a tax or subsidy are likely to be completely irrelevant.  The challenge is to convince that person through education to eat a balanced diet, and cost is only one part of the equation. 

Unless the taxes are levied at very high rates, the demand for various food products is quite inelastic. I don’t think using the New Zealand tax system to subsidise Brussels sprouts by 20% will make people eat more of them, or any vegetable for that matter.

Then there is the reality of what happens in the grocery market where between 60% and 90% of groceries are purchased while on promotion, depending on the category.  A 10% tax here, a 20% subsidy there – the overall effect of any tax or subsidy soon gets lost in the complex world of supermarket pricing and regular promotions.

Mexico is a good example of what will occur. In January last year the government there introduced a tax on fizzy drinks. According to official sales figures consumption volumes are the same as before the tax. 

See the university’s

study here

press release here

infographic here