How Effective Is a Fat Tax in Dealing with Obesity

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V Introduction:
Obesity is a rising concern and the government must intervene in order to change people’s eating habits and monitor their consumption in order to prevent illness, loss of working hours and so on. Further on this report, I will go on to discuss: 1- Obesity and why is it a growing concern?

2- Why should the government intervene?
3- What is a fat tax and what is its effect?
4- How might we impose a fat tax?
5- Impacts
6- Conclusion

Obesity and why is it a growing concern?

Obesity is a medical condition in which excess body fat has accumulated to the extent that it may have an adverse effect on health, leading to reduced life expectancy. Today, obesity has now found its spot as our country’s most crucial health problem, contributing to a huge increase of diabetes, heart disease and cancer. The consumption of excess junk food along with little or no exercise routines fitted into ones schedule leads to obesity. Little has been done to address the problems of overeating and poor dietary choices.

In Dubai, according to an article in the Gulf News, obesity is said to have a greater impact on health rather than smoking or alcoholism. Furthermore, it stated that 20% of the population were obese, which is more than the US! People prefer unhealthy junk food because it is available easily and convenient. Take for example malls. In Dubai especially, the 3 main fast food restaurants are McDonalds, Pizza Hut and KFC. Research proves that in the last few years, there is a rocketing increase in the number of the Mc Donalds and Pizza Hut stores clearly showing the growing inclination of the people choosing the fatty foods. No matter which mall you’re in, you’re bound to find these 3. Malls can choose what restaurants they wish to allow to be set up and knowing that they produce unhealthy food, they still promote it. Why? -simply because they are pure profit centers. They do not care about the social concerns or the opportunity cost to these restaurants which is a major health hazard.

Why should the government intervene?
Most people would believe that weight is an individual concern but I believe that that there is a strong need for Government Intervention. If people find it difficult to stay healthy then the Government needs to tax those foods that discourages them from doing so like junk food (pizzas, burgers, fries etc) Afterall, it is the governments duty to protect its citizens. Also, obesity is an economic concern because it imposes cost such as medical costs for treating obesity as it results in illness such as heart failure etc and inevitably results in lost working days.

My question is that if governments such as India etc heavily fat tax cigarettes and alcohol then why not junk food? Advocates of the tax point to the effect taxes have had on alcohol and tobacco use. Five published studies found that drinking declined as the price of alcohol increased. And so since junk food too is a major health hazard, the government should do something about it. What is a fat tax and what is its effect?

A fat tax [an economic incentive] is a tax or surcharge that is placed upon fattening foods and beverages. It aims to discourage unhealthy diets and offset the economic costs of obesity by affecting people’s decision-making in order to bring the outcome closer to the socially desirable one.Numerous studies suggest that as the price of a food increases, consumption or the demand of that food decreases.

This is shown in the diagram below:

* Equilibrium Price is P
* Quantity demanded and Quantity supplied is Q
* The Price increased from P to P1
* Demand decreased from Q to Q1

How might we impose a fat tax?
1- One way we could impose a fat tax is by increasing the price of some fatty food items that are the leading cause of obesity for example burgers, fries and pizzas. This would decrease the demand for it.

2- Evidence- Taxing soft drinks and pizza can...
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