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Eat healthily or pay

If you neglect your health, it’s only fair that you pay more for the time you become a burden on the health care system due to your choices. That’s the argument for taxing junk food, but the public and the food industry hate the idea.

Chips, soda, fast food and, in general, anything with large amounts of fat and salt will cost more following the introduction of a new tax on such products. With obesity rapidly growing in Hungary, the government is hoping to change public attitudes towards what they eat by making unhealthy treats more expensive.

The “public health product fee,” generally referred to as the “hamburger tax,” was initiated by SSMKE, the strategic association for Hungarian hospitals. It is planned to be a HUF 10 increase in the price of every product deemed unhealthy, adding up HUF 350 billion in projected state revenues, according to a ministry document leaked to the press.

An OECD survey released at the end of December found that 58% of men and 48% of women in Hungary are overweight while 20% and 18%, respectively, are obese. Being overweight multiplies the risk of cardiac conditions, diabetes and tumors and can shorten life expectancy by up to 10 years, the OECD added.

Even more problematic for the state is the fact that these people eventually present burdens on the healthcare system when they get sick later on, having neglected a healthier lifestyle. They will now be required to pay for their eventual treatment in advance. “People who squander the capital that is their health will have to bear a bigger share of the costs,” Prime Minister Viktor Orbán said.

Does it work?

The correlation between unhealthy foods costing more and consumers opting for healthy alternatives as a result is a notion that has become mainstream. The United States, Spain and Austria have all considered restrictions along these lines, but to date, only Denmark has actually introduced them.

Special taxation on unhealthy products is, of course, nothing new. Already, consumers of tobacco products and alcoholic beverages, which are scientifically accepted as being harmful to human health, are paying excise taxes on every purchase.

Scientific tests have shown that the higher prices do evoke positive psychological responses from shoppers, much better than the subsidization of the healthier alternatives, which is sometimes considered as the other – and better – tool to encourage people to buy healthier products.

Psychologists at the University of Buffalo rallied a handful of random shoppers who had to go on mock shopping sprees with scenarios where unhealthy products cost more because of the added tax, while in others, healthy products were subsidized to make them cheaper. The study found that when junk food cost more, shoppers tended to avoid them. However, the money they had leftover from buying subsidized food and vegetables was typically spent anyway – on junk food.

Another study published in the Archives of Internal Medicine also supported the findings. Researchers monitored the eating habits of more than 5,000 people from 1985–1986 and 2005–206. After compiling the data, they found that the changes in the cost of pizzas and sodas correlated with lower calorie counts in the participants’ diet and also lower volumes of these products consumed.

Despite the results that advocates bring up, very few governments have actually made a commitment. Before Hungary, Romania also came up with the idea of a “fat tax,” which was announced in early 2010. However, the plan was eventually shelved because the repercussions – social, political and economic – were seen as too big a risk.

Everyone hates it

Hungarians don’t seem to be too happy about the government putting their snacks on a higher shelf. A study conducted by market researcher Trend Budapest Piackutató showed that 70% of the population reject the hamburger tax. Some 71% of respondents believe that the measures will only make foodstuffs even more expensive and 54% found it would hurt the country’s farming industry.

“The tax would seriously hurt the regional competitiveness of Hungarian companies that are already in a difficult position, especially given that Hungary imposes one of the highest VATs on food products in the EU,” the association of food processors ÉFOSz responded in February, after the government confirmed its intentions with the tax. To date, the association has not received new information on the specifics that it would be able to discuss, the group’s head Tamás Éder said when asked by the Budapest Business Journal.

The strongest political critique often leveled at the government is about the social consequences of the tax. Retailers are already concerned about the lapse in consumption that is likely to follow the boost in food prices. This might lead to certain players having to close or downscale, in either case leading to further unemployment.

Furthermore, the taxation of unhealthy foods is often seen as discriminatory against the impoverished layers of society. Opponents argue that it is typically less-affluent consumers who are buying unhealthy and low-quality products, because that is all they can afford. Those who shop by looking at the nutritional labels instead of the price tag will not feel the difference. But the poor will have to pay more when shopping for groceries, making life more difficult.

Filling gaps

Recent developments indicate that the government may have another motivation, other than reaping the long-term benefits of improved public health.

SSMKE, the group which called for the hamburger tax in the first place, has already signaled that it wants the money to be collected to go to raising the salaries of medical professionals, which is escalating to be a serious problem for the country. Recently, around 3,000 doctors have lodged a protest, depositing their resignations at an attorney, to take legal effect at the end of the year if their demands for raises are not met. Were that to happen, the health care system would in all likelihood collapse.

Getting the additional revenues from the products labeled as unhealthy could be just the abundant source of money to remedy the situation, even if it is only going to put out the immediate fires.