Among the many government-led strategies to promote healthy diets, keeping healthy food free of sales tax offers clear benefits.
When the political party, the Australian Democrats, negotiated an exemption for essential healthy foods as part of the state’s introduction of a GST in 2000, they set out to take often underappreciated action to help keep healthy diets less expensive.
While US President Joe Biden calls for ideas to help end hunger and improve nutrition, there are simple tax options he can consider.
Among the three related food price manipulation strategies used by government subsidies for healthy foods (eg agricultural subsidies and transportation subsidies, retail price reductions or vouchers for at-risk groups); taxes on specific unhealthy foods; and exemptions from GST or VAT for healthy foods, the latter being the least common.
Many countries and some US states tax certain unhealthy foods, the most common of which are sugar-sweetened beverages. But only Australia, Canada, Mexico, Ireland and the United Kingdom apply differential taxes according to the health of broader groups of food.
In the face of rising costs of living, climate change and chronic disease, efforts to ensure nutritious and sustainable diets for all are more important than ever.
Governments can use different strategies to manipulate food prices, but exempting healthy foods such as fruit vegetables, bread, fresh meat, fish, milk and eggs from the GST that applies to all unhealthy, discretionary or ultra-processed foods and drinks helps avoid these taxes being regressive. It promotes food choices that benefit people’s health.
Poor diet is the main preventable contributor to the disease burden in Australia and the world. High rates of obesity, type 2 diabetes, heart disease, some cancers and other chronic diseases are underlined by poor diets rich in unhealthy foods.
More than two-thirds (67 per cent) of Australian adults and one in four children in Australia are overweight or obese. Less than 4 per cent of adults consume a diet that complies with Australian Dietary Guidelines. Food choices are driven by obese food environments, which promote ubiquitous availability and the promotion and convenience of unhealthy foods and drinks.
Underinvestment in nutrition and preventive health promotion programs is not helping. Also, the perception that healthy foods are more expensive than unhealthy options, due to marketing, including promoting fast food deals. As a result, more than a third of adults’ energy intake, and about 40 percent of children in Australia, is derived from unhealthy foods and drinks. Australian families spend about 58 percent of their food budget on these unhealthy options.
The GST exemption for basic healthy food in Australia helps keep the relative price of healthy food low. Several research studies have shown that diets compliant with Australian Health Guidelines can be 16 percent to 24 percent less expensive than usual diets reported in the latest National Health Survey.
However, in many places, healthy diets are still too expensive for families with minimum wage or welfare income, with total costs exceeding 30 percent of disposable family income. The proportion of income needed to purchase food is greater in Aboriginal, Aboriginal, Torres Strait Islander and remote communities.
Since the introduction of the GST, there have been repeated calls to expand its base to include healthy foods that are currently exempt. Modeling studies confirm that this would increase the cost of healthy diets by about 10 percent, more than double the increase in the cost of the current unhealthy diet (4.5 percent). This would add another obstacle to shifting to recommended diets, especially for the most vulnerable Australian families.
Another study confirmed that if healthy foods were exempt from the 15% Goods and Services Tax (GST) levied on all food and beverages in New Zealand, healthy diets would be significantly more affordable.
If the Goods and Services Tax (GST) rate on unhealthy foods and drinks is increased to 20 per cent in Australia, and existing exemptions are retained, this would effectively increase health fees and help encourage improved food choice. The cost of a healthy diet will not be affected, but the cost of an unhealthy diet will rise. Additional differential tax rates, such as the 30 percent GST on sugar-sweetened beverages, may also have an advantage.
At a time of rising cost of living and food insecurity, keeping basic, healthy foods and drinks GST-free is essential to protect economic access to healthy diets for many Australians. An increase in the differential GST rate would bring greater benefits to the population, the health of the planet, and future government spending.
(360info: By Amanda Lee, Lisa Marie Heron and Myron Lewis, University of Queensland, Brisbane)
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