#WHO recommendations on 'sin taxes' could increase EU food bills by more than €600 per year

A behind-closed-doors summit at the weekend agreed a manifesto that will dramatically increase the price of food and groceries for billions of people around the world, the Institute of Economic Affairs warned.

The secret meeting at a five star hotel in Geneva, organized by billionaire Michael Bloomberg and the World Health Organization (WHO), is set to drive governments all over the globe to dramatically increase ‘sin taxes' on food and drink that they deem to be unhealthy.

The WHO claims that a 20% increase in the price of fizzy drinks would decrease consumption by 20% and improve health, despite there being no international evidence that sugar taxes have reduced obesity. This follows calls from campaigners for soda taxes – such as those that have been introduced in the UK, Ireland, France and Hungary – to be extended to milkshakes, coffee and food.

A new analysis by the IEA’s head of lifestyle economics, Christopher Snowdon, shows that a twenty per cent tax on the food and drinks that the WHO considers ‘unhealthy’ would cost typical families as much as €523 (£458) more per year in the UK; €546 in Italy; and €606 per year in Ireland.

Overall, the range of sin taxes proposed by WHO and Bloomberg – excluding tobacco – could cost consumers in the United Kingdom €14.2 (£12.4) billion per annum in additional tax, while in Ireland and Italy the cost could be €1bn and €13.5bn respectively.

Key facts

• The WHO’s definition of ‘unhealthy’ food arbitrarily categorizes food and drink deemed high in fat, sugar, salt or calories. This could mean tax rises for consumers of milk drinks, breakfast cereals, confectionary, baked goods, yoghurts, crisps, bread, soup and lunchbox staples such as sliced ham.
• The regressive nature of sin taxes means that in the UK people in the poorest decile already spend 34% of their disposable income on indirect taxes, while in Ireland they spend 27%. And these figures do not include the so-called sugar taxes imposed in these countries earlier this year.
• Last month, at the World Bank/IMF Spring Meeting, Bloomberg admitted his prescriptions will fall most heavily on the poor but claimed that it’s for their own good, stating “the problem is in people that don’t have a lot of money, so higher taxes should have a bigger impact on their behaviour and how they deal with themselves”. But there is no evidence from anywhere in the world that taxes of this kind work.
• Sin taxes are a reliable source of revenue precisely because – for the most part – people continue to buy the products. Whilst they are intended to reduce consumption of demerit goods and indirectly improve health, the products being targeted are price inelastic, meaning consumers see their cost of living rise.
• The impact in developing countries will be even more punishing because families spend a higher percentage of their disposable income on feeding themselves.

Commenting on the briefing, Chris Snowdon, head of lifestyle economics at the Institute of Economic Affairs, said: “The meeting might have been deliberately behind closed doors, but we know what it’s about. It is a planning session organized by the richest of the rich for a global assault on the poor. Billionaire Mike Bloomberg seems determined to use his twilight years conducting a warped social experiment to make poor people behave better.

“Taxing the groceries of ordinary families will only succeed in making them poorer, when all the credible evidence shows that the best way to improve health is to make people richer.”

Methodology

The Institute of Economic Affairs has calculated the impact on household consumption in four countries where consumption data are available.

For food, non-alcoholic beverages, and alcohol, it has calculated the impact of a twenty per cent tax on current consumption of potentially taxed categories as reported by the UK Office of National Statistics, the Irish Central Statistics Office and the Italian National Institute of Statistics.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.

The IEA is an educational charity registered in the UK and independent of all political parties.

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