Taxing High Fat Sugar Salt (HFSS) Food

Taxing High Fat Sugar Salt (HFSS) Food

News: Here we discuss how eating too much HFSS food is causing health problems like obesity and diabetes worldwide.

Background:
• It focuses on India, where unhealthy eating habits are growing fast, and suggests that higher taxes on such foods could help reduce their consumption.

What is HFSS?
• According to Ministry of Women and Child Development, HFSS foods may be defined as foods (any food or drink, packaged or non- packaged) which contain low amounts of proteins, vitamins, phytochemicals, minerals and dietary fiber but are rich in fat (saturated fatty acids), salt and sugar and high in energy (calories) that are known to have negative impact on health if consumed regularly or in high amounts.

What is the need to tax HFSS food?
• Health Risks: HFSS foods contribute significantly to health issues like obesity, diabetes, and high blood pressure. The global burden of Non-Communicable Diseases (NCDs) in India has surged from 38% in 1990 to 65% in 2019, with 1.2 million deaths annually attributed to dietary risks.
• Economic Impact: The economic impact of overweight and obesity in India was estimated at $23 billion in 2017, expected to rise to $480 billion by 2060.
• Market Failures and Externalities: The consumption of HFSS foods leads to negative externalities in the form of increased healthcare expenditures, imposing societal costs. Taxes are proposed as a targeted tool to curb detrimental consumption habits, reducing societal burdens.
• Incentivizing Healthier Choices: Unlike sin goods, HFSS taxation aims to incentivize the industry to reformulate products for healthier alternatives and prompt consumers to choose a healthier diet.
• Global Trend: Many countries, including Denmark, France, Hungary, Mexico, South Africa, the UK, and the US, have implemented taxes on HFSS foods to combat obesity.

Status in India:
• In India, the current GST system taxes ultra-processed foods such as salty snacks and sugar-sweetened beverages (SSBs) uniformly. For example, all aerated beverages are subject to the same tax rate, regardless of their sugar content, failing to differentiate based on their health impacts.
• In the past, Kerala had introduced a ‘fat tax’ in 2016, which later got subsumed into India’s Goods and Services Tax in 2017.
• The ultra-processed food sector in India grew at a compounded annual growth rate of 13.4% between 2011 and 2021.

Key Recommendation:
• The WHO and the Indian Council for Research on International Economic Relations (ICRIER) has i) urged the FSSAI to clearly define High Fat Sugar Salt foods, ensuring transparency, b) It recommends a nutrientbased tax model, levying higher taxes on products high in fat, sugar, and salt, and lower taxes on healthier alternatives.