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Obesity Costs: The Financial Implications of Implementing a Fat Tax

Nov. 09, 2023   •   Mohd Ayaz Raza


It is widely agreed upon by world leaders gathered at the UN General Assembly that significant steps must be taken to address non-communicable illnesses[1]. An improper diet that is high in calories and a significant contributor to obesity is one of the four main risk factors for chronic illnesses[2]. The market is responsible for providing the proper amount of nourishment for society's well-being, and pricing has a significant impact on what individuals choose to eat. It is well known that nutrition has a major impact on both morbidity and death. Therefore, because market forces have not been sufficient to address the increasing obesity pandemic, government action is necessary. Individuals often find it difficult to link their eating choices to illness, frequently choosing to eat for momentary satisfaction rather than thinking about the long-term effects of their decisions on society.[3]

Society as a whole has the responsibility for the health consequences associated with illnesses linked to obesity. It is necessary to place this extra expense on the people who are accountable for their harmful behaviours to make this right. The government may do this by enacting a "fat tax," which targets fatty foods, drinks, etc.[4]. The fat tax's basic idea is simple: provide financial incentives for making better decisions. Food tax advocate Kelly Brownell first emphasized that foods heavy in fat and poor in nutrients are often more expensive than those with lower fat and more nutrients[5].

Eating unhealthy food isn't always a decision made by the individual. According to research by Drewnowski and Specter, cookies and fresh carrots have significantly different energy costs, with cookies being far less expensive per unit of energy. Similarly, carbonated beverages were found to be cheaper than concentrate-based orange juice. These unhealthy meals are popular because they are pleasurable and increase sensory experience, which attracts those with lesser incomes.[6]

Acceptability, Feasibility, And Efficacy

According to research by Powell and Chaloupka, little taxes or subsidies did not affect obesity or BMI levels. More significant price actions are needed to achieve meaningful improvements. Although food costs have very little impact on obesity rates overall, they may have a considerable impact in certain situations, especially for those from low socioeconomic backgrounds and those who are at risk of being overweight or obese. Though not statistically significant, even little adjustments may result in substantial reductions in illness incidence. For example, imposing a 17.5% Value Added Tax (VAT) on unhealthy foods in the UK may reduce the prevalence of ischemic heart disease by 1-3%, which would save 900–2700 fatalities each year.[7]

Although the government may choose to impose a nutrient tax based on the amount of nutrients present in food, it might be more economical to charge certain food types, particularly those that are low in nutritious value, as proposed by Clark and Dittrich's "Composite Commodity Fat Tax." This strategy, however, has the danger of increasing the cost of necessities, which might result in dietary deficits and associated health issues[8]. On the other hand, the "Nutrition Index Fat Tax" recognizes that no one nutrient is completely to blame for obesity and takes into account the complicated link between obesity and nutrients[9].

Numerous surveys indicate that there is a modest level of approval when individuals are told that the money raised by fat taxes would go toward obesity prevention and health education initiatives. However, the popular acceptability of these tariffs is hampered by resistance from the food business, convenience shop groups, and restaurants.


There is a big difference when fat taxes and tobacco taxes are contrasted. Tobacco taxes only apply to smokers; fat taxes are imposed on everyone, including those who are not obese. Consuming fat is not the only factor that contributes to obesity. One of the many factors that might lead to obesity is a lack of exercise. Research shows that people who are obese are less responsive to changes in food costs than those who are normal weight. This suggests that although fat taxes may not be a successful strategy to address obesity, they might stop it from becoming worse.

The current fat tax system ignores individual variables such as gender, age, and food category replacements as well as interactions between nutrients and dietary habits. It also calls into question the extent to which the government impedes people's right to free will.

Furthermore, these taxes are regressive since they disproportionately impact the poor. Low-income people end up bearing a greater cost because they consume a greater percentage of taxed goods and devote a bigger share of their income to food. Reducing the regressive character of food taxes while optimizing health benefits would be possible by using the money raised by these levies to assist the reform of the food sector or subsidize healthful foods.[10]

Situation In India

A Lancet study found that a large percentage of Indian men and women are obese in the abdomen, and Kerala was the first state to impose a food tax in 2016[11]. With a rate of 14.5%, this tax was mostly directed at big-box retailers like KFC and McDonald's, with little effect on the poor[12]. The national government implemented new tax rates in 2022, charging 12% GST on branded goods and 5% GST on non-branded goods[13].


[1] ‘Leaders Gather at UN Headquarters for a High-Level Meeting on Non-communicable Diseases (NCDs)’ (The United Nations, 2011) <> accessed 1 November 2023

[2] Sara Bleich et al ‘Why Is the Developed world obese?’ 2008 29 Annual review of public health <> accessed 1 November 2023

[3] Kelly Brownell et al, ‘The public health and economic benefits of taxing sugar-sweetened beverages’ (2009) 361(16) NEnglJ Med. <> accessed 2 November 2023

[4] Wang SS, “Another Thing Big In Japan: Measuring Waistlines” (WSJ, June 13, 2008) <> accessed 1 November 2023

[5] ‘A Sugar High and a Fat Tax – Why We Were Buzzing at the APS Conference’ (2011) 33(6) InPsych <> accessed 2 November 2023

[6] Adam Drewnowski, ‘Taste preferences and food intake’ (1997) 17 Annual Review of Nutrition <> accessed 1 December 2023

[7] Tony Marshall, ‘Exploring a fiscal food policy: the case of diet and ischemic heart disease’ (2000) 320(7230) BMJ <> accessed 2 November 2023

[8] Darius Lakdawalla et al, ‘Welfare Enhancing Technological Change and the Growth of Obesity’ (2005) 95(2) American Economic Review <> accessed 3 November 2023

[9] J Steven Clark and O Ludwig Dittrich, ‘Alternative Fat Taxes to Control Obesity’ (2010) 16(4) International Advances in Economic Research <> accessed 1 November 2023

[10] Andrew Leicester and Frank Windmeijer, ‘The Fat Tax: Economic Incentives to reduce obesity’ (2004) Institute of Fiscal Studies <> accessed 1 November 2023

[11] Monika Chaudhary and Priyanshu Sharma ‘Abdominal obesity in India: analysis of the National Family Health Survey-5 (2019–2021) data’ (2023) 14(100208) The Lancet Regional Health – Southeast Asia <> accessed 2 November 2023

[12] Yuvaraj Krishnamoorthy et al, ‘Fat taxation in India: A critical appraisal of need, public health impact, and challenges in nationwide implementation’ (2020) 10/1 Health Promot Perspect <> accessed 1 November 2023

[13] Government to impose tax on unhealthy food items to tackle obesity Times of India (3 March 2022) <> accessed 1 November 2023

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