Tax on ‘unhealthy’ consumer staples could cost Irish families €606 a year

IEA warns that ‘sin taxes’ could hit poorest the hardest

Foods that could be taxed under a “sin tax” include yogurts. Photograph: iStock

Foods that could be taxed under a “sin tax” include yogurts. Photograph: iStock

 

Taxes on household staples including yoghurts, crisps, bread and sliced ham could cost a typical Irish family an extra €606 per year, a report by the UK’s Institute of Economic Affairs (IEA) has found.

These items, alongside milk drinks, breakfast cereals and soup, could be hit by significant taxes considering they fall under the bracket of “unhealthy” food as deemed by the World Health Organisation (WHO).

The IEA warned that a summit this weekend will agree a manifesto which will have the effect of hiking the price of food and groceries around the world. The meeting, organised by businessman Michael Bloomberg and the WHO, is “set to drive governments all over the globe to dramatically increase ‘sin taxes’ on food and drink that they deem to be unhealthy”, the IEA said.

Analysis by Christopher Snowden, the organisation’s head of lifestyle economics, shows that a 20 per cent tax on the food considered unhealthy by the WHO would cost €606 per year, or a cumulative cost to Irish consumers of €1 billion each year.

Food deemed “unhealthy” by the WHO includes items high in fat, sugar, salt or calories. This led the IEA to add household staples such as breakfast cereals and yoghurts to their list of items that could be taxed.

“Taxing the groceries of ordinary families will only succeed in making them poorer, when all the credible evidence shows that the best way to improve health is to make people richer,” Mr Snowden said.

Poorest decile

The IEA is a free-market think-tank founded in 1955.

In relation to the sin taxes, the IEA flagged that people in the poorest decile in the Republic spend around 27 per cent of their gross income on indirect taxes. It said that while sin taxes are intended to reduce consumption, the products being targeted are “price inelastic”, meaning consumers see their cost of living rise.

“The kind of taxes on food and drink proposed by WHO and Michael Bloomberg would lead to a significant increase in the cost of living for consumers in all the countries we studied. Estimates range from $612 (€518) in the USA to €606 in Ireland.

“The nature of the taxes would inevitably hit poorest households hardest. Our analysis is confined to four rich countries; the impact would be even more severe in developing countries,” the IEA said.