Taxes in the name of health not so healthy for personal freedoms
Consumers are worse off because of the government's insatiable appetite to wring revenue from citizens
From 1993 to 2002, purely to raise revenue, a tax was levied on soft drinks and mineral water. On April 1 (and nothing to do with April Fool’s Day), the government decided to reintroduce this tax, calling it a “health promotion levy”.
The state coffers now may be slightly healthier as a result, but consumers, particularly low-income individuals, are worse off because of the government's insatiable appetite to tax citizens.
Reductionist approaches to weight loss are ineffective on a population-wide scale and will only result in unintended consequences
The Treasury claims the "new" tax is not a revenue-raising mechanism but rather a genuine attempt to address SA’s rising rate of obesity. And it seems surprised that it has raised more money than anticipated. But putting aside the fact that the “health promotion levy” only targets sugary drinks and is therefore clearly discriminatory and arbitrary, it has not been ring-fenced, which raises an interesting dilemma.
If, as the Treasury claims, it is not a revenue-raising scheme, then another tax should have been reduced or done away with. Instead, what we have is a new tax in addition to an increase in VAT, a regressive tax that disproportionately affects the poor. And, as a consequence, we have a significantly higher tax-to-GDP ratio.
Broadly speaking there are two types of taxes: direct and indirect. Direct taxes, such as personal and company taxes, are paid directly to the government. Indirect taxes are collected on behalf of the government by intermediaries such as retail outlets and paid over to the government in due course. The most common example of indirect taxation is VAT.
Most indirect taxes are stealthily applied only to certain goods and services, to the extent that some people are not even aware that their purchases of these goods include tax. These taxes are typically referred to as "soft taxes" because they can be easily imposed by the government without the public objecting too much or even realising they are there. Prime examples are fuel levies, which constitute almost 40% of the price of petrol, and the so-called sin taxes, which are levied mainly on alcohol and tobacco products.
What governments the world over fail to recognise is that what people do with their own bodies is none of the state’s business. Imposing a soft tax on sugary drinks is a blunt instrument that, besides undermining consumers’ individual liberties and treating adults like children, will not result in any perceptible difference to obesity rates.
Urbanisation, an abundance of easily available calories and modern lifestyles with few physical demands make it easy for people to store surplus energy. Governments cannot change these circumstances without resorting to North Korean-style famine-inducing dictatorships. Energy intake is just one of the many factors that require consideration. The way people eat, drink and move has changed dramatically in the past few decades.
Other factors influencing obesity are highly complex and include the food environment, types of food consumption, physical activity, individual psychology, societal influences, genetics and multiple biological responses. The individuality and complexity of the human response is part of the reason government interventions fail. Tax legislation, subsidies, dietary guidelines and food labelling requirements cannot be tailored to suit individual circumstances. Reductionist approaches to weight loss are ineffective on a population-wide scale and will only result in unintended consequences. Governments should not assume there will be negligible or no harm caused by their policies.
Lowering obesity rates is not an impossible goal. The ability of some previously obese individuals to adjust their behaviour and lifestyles to attain a healthy weight is testimony to this. Tackling obesity needs to be more personalised to accommodate vast metabolic diversity and differing circumstances. Individual empowerment, education and small-scale personal or community-led efforts would be more effective than punishing taxes and manipulative social engineering. Government intervention should be resisted, and people allowed to find tailored solutions that best meet their unique needs.
Ultimately, better health outcomes can only be achieved by consumers taking charge of their own lives. A more durable strategy would be to educate individuals about the benefits of a balanced, nutrient-rich diet. There can be no disputing the fact that a wealthier nation is a healthier nation. However, taxing a nation is a sure way to reduce the wealth of citizens and prevent them from being able to afford to make healthier food choices.
The tax on sugary drinks further erodes our personal freedoms. Yesterday, the target was tobacco and alcohol, today it is sugary drinks, tomorrow it could be sweets, chocolates and artificial sweeteners. The range will only get wider, and in time government-imposed restrictions may well encompass minimum amounts of exercise and how long you should be out in the sun. Choices will no longer be yours to make — all in the name of your health.
• Urbach is an economist and director of the Free Market Foundation.