• Brooke Kuipers

Overweight and Obese: Will a Fat Tax Save Australia?

Australia has a growing obesity epidemic with 63.4% of Australians aged over 18 classified as overweight or obese (Australian Bureau of Statistics [ABS], 2014-15). Around the world, governments are searching for sustainable and cost-effective strategies to combat the obesity epidemic (Sacks, Veerman, Moodie, & Swinburn, 2011, p. 1001). Australia, Sweden and the Netherlands, for example, have all introduced laws against food advertisements that are aimed at children younger than 12 (Nestle, 2006, p.2527).

Governments use taxes to shape consumer behaviours to those they value, such as charitable giving, or to discourage behaviours such as smoking or eating unhealthy foods (Olivola & Sussman, 2015, p. 568). The Australian government should consider increasing taxes on sugar-sweetened beverages (SSBs) and nonessential energy-dense foods to reduce the overall health care expenditure whilst increasing tax revenue, which could subsidise healthy foods; Australia’s successful taxes on alcohol and tobacco have proved that sin taxes are effective in lowering consumption of these products.

The implementation of a fat tax could reduce the consumption of unhealthy foods and result in the prevalence of obesity or other health related issues declining, especially in lower-income households (Veerman, et. al., 2016, p.4). Obesity is now the primary cause of illness and premature death in Australia, overtaking smoking (Bond et. al., 2010, p. 472). The global obesity epidemic has not developed from a reduction in physical activity, but rather the result of over-consumption; reducing this over-consumption, of unhealthy food in particular, should be the major key in any strategy to combat rising obesity levels (Bond, Williams, Crammond, & Loff, 2010, p.472).

Mexico successfully implemented a ‘fat tax’ in 2014, resulting in a 5.1% decline in the volume of taxed foods purchased (Batis, Rivera, Popkin, & Taillie, 2016, p.2). This tax, however, did not lead to a significant reduction in overall calorie consumption (Aguilar, Gutierres, & Siera, 2016, p.18). Batis, et al, (2016) found that socioeconomic standing affected the buying trends in Mexico; low-income households on average bought 10.2% fewer taxed products and high-income households did not change their buying habits (2016, p.10). Some lower-income households actually spent more of their income to continue accessing the taxed foods (Aguilar, Gutierres & Siera, 2016, p.18); however, the majority of lower-income households reduced the volume of taxed foods they bought (Batis, et. al., 2016, p. 10).

In Australia, rates of obesity are higher in low-income households (ABS, 2007-8); therefore, implementing a ‘fat tax’ similar to Mexico could reduce the disparity in diet and obesity between socioeconomic levels by providing an incentive to lower-income households to lower their consumption of unhealthy foods (Batis, et. al., 2016, p.11). Although lowering consumption will not stop the obesity epidemic, it will assist in preventing the prevalence of new cases of obesity and other weight related health issues (Veerman, Sacks, Antonopoulos, & Martin, 2016, p.6).

The introduction of a fat tax reduces health care expenditure and raises tax revenue, which could subsidise healthy foods (Veerman et. al., 2016, p.6). The initial implementation of a 20% valoric tax on SSBs in Australia would cost the government an estimated AUD27.6 million; however, Veerman, et. al. found that implementing the tax would raise tax revenue by AUD400 million each year (2016, p.6). The Australian government has spent AUD2 billion per year implementing multiple health promotion activities that aim at preventable chronic illnesses, such as heart disease and type 2 diabetes (Jackson & Shiell, 2017, p.6). Implementing a 20% tax on SSBs could lower the prevalence of these preventable chronic diseases by 240 and 800 cases per year respectively, reducing the annual health care costs by roughly AUD29 million per year (Veerman, et. al., 2016, p. 4-5).

Energy-dense foods are composed of refined grains with additional sugars and fats, and they usually represent the lowest cost option compared to diets of lean meats and vegetables; therefore, lower income households tend to buy these low-cost, energy-dense foods resulting in higher rates of obesity (ABS, 2007-8). A healthy diet does not cost more than an unhealthy diet, contrary to popular belief, although lower-income households still spend the majority of their disposable income to access these healthy foods (Lee, Kane, Ramsey, Good, & Dick, 2016, p.15). The government could subsidise healthy foods and reduce the amount spent on health promotion activities if they implemented a fat tax to alter consumer behavior, as they have for tobacco and alcohol.

The use of sin taxes has proven to be an effective tool in changing behaviours and reducing consumption, as shown from Australia’s successful taxes on alcohol and tobacco (Bond, Williams, Crammond, & Loff, 2010, p.472). The Australia’s Future Tax System Review suggested that the Australian government increase taxes on tobacco and alcohol, stating that higher taxes are the most beneficial way to reduce the negative effects caused by the abuse of these products (Henry, Harmer, Piggott, Ridout, & Smith, 2010, p. 55-56). However, Bond et. al. states there are no taxes recommended for junk foods, despite the similar social costs and misuse (2010, p.472).

Both the alcohol and tobacco industries argued that introducing a tax on their products would affect jobs and impact lower-income households, arguments the junk food industry is also using; however, the Australian government still taxed these products (Bond et. al., 2010, p. 473). A main ingredient in junk food is sugar, which has similar neurotransmitter changes as addictive narcotics (DiNicolantonio, O’Keefe, & Wilson, 2017, p. 1-2). Junk foods, alongside addictive narcotics, provide short-term pleasure and come with significant costs of premature death and serious illness (Bond et. al., 2010, p. 472).

The Australian government justifies the taxes on tobacco and alcohol based on their highly addictive qualities, serious health impacts, and the effects on community health (Bond et. al., 2010, p.472; Hoad, Somerford, & Katzenellenbogan, 2010, p.15). However, research shows that chronic smokers can suppress cigarette cravings more effectively than they can suppress food cravings (DiNicolantonio et. al., 2017, p.1). These taxes on tobacco products have reduced the amount and intensity of smoking, proving to be an effective tool in limiting consumption of unhealthy products (Bond et. al., 2010, p.472; Henry et. al., 2010, p. 55-56). Data suggests that the implementation of a ‘fat tax’ can reduce consumption of taxed products, leading to a decrease in the prevalence of obesity or health related issues (Veerman, et. al., 2016, p.4; Bond et. al., 2010, p. 472).

Australia’s successful taxes on tobacco and alcohol to alter consumer behaviour should be acting as a stepping-stone for the implementation of a fat tax. These taxes have been successful in reducing consumption and misuse of their respective products, with their related illnesses and premature deaths also lowering. The introduction of a fat tax could raise tax revenue whilst lowering the prevalence of obesity, heart disease, and type two diabetes. Moreover, the reduction in these weight-related illnesses would reduce health care expenditure and provide room in the Australian budget to subsidise healthy foods. A fat tax introduced following the same steps as Australia’s successful sin taxes on alcohol and tobacco would undoubtedly succeed in reducing the consumption and abuse of junk food.


Aguilar, A., and Gutierrez, E., and Siera, E. (2016). Taxing calories in Mexico. Manuscript in preparation

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