Burgers, Fries and Taxes: Kerala Levies a Heavy Tax on Junk Food
Last week, the Indian state of Kerala implemented a tax on junk food that has been called the "fat tax." The tax is levied at a rate of 14.5%. While currently limited to one state, the policy sets a precedent that the rest may soon follow especially after seeing the revenue that the fat tax brings Kerala.
The state is adding the tax for one reason: money. Kerala is not looking to fight for the health of its citizens, it just sees the chance to squeeze more money from working people.
India claims that it is using the tax to combat obesity, yet the tax falls short of that objective. The tax only applies to brands such as the major chains McDonald's, Burger King, Domino's, and KFC. Thus, the tax aims to push citizens away from these businesses and toward local foods which as one cafe owner noted, "A lot of local food is more fatty and unhealthy." A dietician echoed that thought, “Why just burgers and fries? Indian food is also laden with empty calories, which give no concrete nutrition.” The tax is not truly altering the dietary habits of Indians, it is targeting certain multinationals that the government does not approve of.
Indian lawmakers pointed to past attempts at the fat tax as their inspiration for the policy. However, they ignore that the tax was a resounding failure in Denmark, the one country where it was previously implemented. In short, the Danish tax led to inflation, job loss, and cross-cross border shopping while requiring massive administrative costs to operate. When the Danish saw the drawbacks coupled with a lack of success at combating obesity, they wisely disbanded the tax in less than a year.
In a study examining the Danish fat tax, the think-tank Institute of Economic Affairs concluded that the fiasco has created lessons for policy-makers considering that tax. The study explained that the effects on calorie consumption and obesity will be minimal while the tax itself is regressive, inefficient, and unpopular. Yet three years later, Kerala is ignoring the evidence from Denmark to create a ridiculous tax.
Right now it is just a small state in southern India, but as other nations see Kerala’s tax, they will see another opportunity to add to their coffers. Countries are already debating their version of the tax including in Italy while Barbados was forced to quash rumors of a fat tax that arose after Kerala’s new policy.
Just as other states will copy this ridiculous tax, it begs the question, what else will governments tax? One Indian newspaper quipped that next will be a skinny tax, or a sick tax, or maybe even a dumb tax to control the behavior of its people.
If the government truly wanted to help its people make a more healthy option, it should have launched an educational campaign to help its citizens make an informed decision. Instead, the government is using a high tax to remove the ability to choose from its people while stealing money from hardworking citizens.
Photo Credit: Zhao