Taxation policies are required to ensure that the highest tax slabs are allocated for foods that fall in the category of high-fat sugar and Salt (HFSS) food items.
The World Health Organization has called to introduce a nutritional-tied taxation system for ultra-processed foods in India. It is also suggested that GST rates be linked to the value of the product’s nutrition. They are included in the WHO ICRIER (Indian Council of Research in International Economics) report, released this week, which analyzes the current trends and challenges of manufacturing ultra-processed foods in India.
It has also been suggested that incentives and financial subsidies offered to food producers be tied to the nutritional quality of their food products. According to the WHO, it will be a catalyst for manufacturers to create healthier foods, and the higher taxes could lead to less use of harmful foods.
There is no incentive, or any, in the production or consumption of healthy foods.
The report also declares that the absence of a nutrition-related tax means that every company is lobbying to place their products on the most affordable GST tax slabs regardless of their health score.
“Tax policies need to be carefully designed, with the highest tax slab for High Fat (or trans fats) Sugar and Salt (HFSS) foods and the lowest tax slab for reformulated and healthy products such that the consumption of HFSS food is discouraged, and at the same time people’s purchases are guided towards healthier consumption,” the report claims.
There is a need for a taxation policy to ensure that the most lucrative tax slabs are allocated for food items that are classified under the category of High Fat Sugar and Salt (HFSS). The HFSS category is scheduled to be officially announced in the coming days by FSSAI. Food Safety and Standards Authority of India (FSSAI). Most junk food items, like cakes, sweet biscuits, cakes, doughnuts, and pastries, are generally classified as food items containing HFSS.
It is also recommended that WHO has also stated that financial assistance should be provided to producers of healthy foods to aid them in paying their production costs and boost more players to join the market. It also recommends export incentives for foods that are highly sought-after overseas.
“While export-linked incentives cannot be given directly, they may be smartly designed to support production,” the report says.
There are distinct tax slabs that apply to different items, but there is no unifying reasoning or criterion. For instance, chocolate is subject to more taxes than sugar-based confectionery. Likewise, all salty snacks, or namkeens, are taxed at the same rate of 12 percent, regardless of the salt content contained in these snacks. All sugary carbonated drinks have an additional tax of 40 percent on them irrespective of whether they contain sugar contained in the glasses (including ones with no sugar)
The three-pronged aim of financial regulations on highly processed food products
The report states that when FSSAI publicly announces HFSS products, the GST council must link its tax structure to HFSS definitions and begin levying taxes. The WHO has demanded the achievement of three goals by implementing nutrition-linked taxation and financial subsidies to manufacturers.
- Incentivize producers to make their products more healthy for consumers.
- Provide healthy foods quickly to consumers.
- Encourage the production of unhealthy food items.
The report also mentions instances of a specific consumption tax imposed on sugar-based drinks in Portugal, Taxation on packaged drinks and food within Hungary (2011) as well as the Junk food tax ( 2014) that is set on foods with more than 200 calories per 100 grams as instances of how regulations on finance successfully led to a positive shift in consumption of food items that are processed products.
Regulation of financial transactions without awareness won’t work: Experts.
The report reveals that the ultra-processed food industry grew at a compound annual percentage of 13.37 percent from 2011 to 2021, despite some slowdowns during the pandemic. The rate of the retail sales volume fell between 47.7 percent in 2011 to 46.1 percent by 2021.
“Excess consumption of ultra-processed food is associated with multiple health conditions mainly because of the preservatives and chemicals added to it during the manufacturing process,” said Dr. Sayan Paul, Senior Consultant Radiation Oncology Apollo Cancer Centre, Kolkata. He adds that the WHO has identified certain additives used in ultra-processed food as carcinogens that could cause cancer.
“The most recent example would be that of Aspartame, the artificial sweetener used in carbonated drinks instead of natural sugar,” He adds.
However, Dr. Paul states that taxation and financial regulations could only achieve the desired effects with health consciousness among the standard population. He believes rules are acceptable, but people must be educated to comprehend why these highly processed food products are harmful.
“So, basically it has to be a combination of both awareness and some regulations from the government,” Dr. Paul states.
Dr. Banshi Saboo, Diabetologist and chair candidate (South Asia), International Diabetes Federation (IDF), also offers a similar perspective and states that financial regulations alone do not solve the problem.
“If people don’t know what has caused the price increase, it won’t have the desired effect over the long term. It is important to be aware that this is not beneficial to their overall health. However, the suggestion of giving the manufacturers of healthy foods must be appreciated,” Dr Saboo adds.
Lenin Raghuvanshi, food safety activist and the CEO of the People’s Vigilance Committee on Human Rights (PVHCR), Uttar Pradesh, claims that the government needs to focus more on the labels of food items and provide more information about the nutritional content and ingredients in packaged foods.
“Food labels with prominent warning signs are more effective than this extra taxation. The government should make it compulsory for unhealthy foods to display prominent warnings, similar to what they do for smoking products. Suppose there’s a proposal for a tax on nutrition that is based on nutrition. In that case, they should use the money generated to create greater awareness about health among people,” Raghuvanshi adds.
- The taxation of nutrition is a good idea to implement, suggests WHO
- The suggestion is a part of the suggestions to improve the health and nutritional quality of foods that have been processed.
- The possibility of financial incentives for food-safe product producers is also being discussed.
- Financial regulations without a healthy awareness of people may not be a success.