Proposed ‘fat tax’ to hit junk food lovers, fund healthcare
Junk food lovers will soon have to dig deeper into their pockets to enjoy their favourite meals if a proposed Medicare Levy, which seeks to tax sugary and ‘unhealthy’ foods, is implemented.
The proposed “fat tax” by the Health ministry is dual pronged — to raise money for one of President Uhuru Kenyatta’s Big Four projects,Universal Health Coverage (UHC), and cut the consumption of “unhealthy” foods.
“The essence of slapping heavy taxes on these products is to make Kenyans reduce their intake as well as using the taxes to fund the health sector,” said the source at the ministry.
Those likely to feel the weight of what is called ‘fat tax’ will be the middle-class, youth and especially college students who fancy such foods — sodas, hamburgers, pizzas, sausages and chips — usually popular the city and other urban areas.
According to a source close to the ministry’s technical committee formulating the new tax targets foods being blamed for the increase of many chronic diseases such as cancer, diabetes, hypertension and obesity.
“Discussions are at the legislative level at the Health ministry and the announcement will be made soon,” revealed our source.
If the model is successfully rolled out, Kenya will be the first in East Africa to actualise it. In South Africa, the government introduced taxes on sugary products whose proceeds go towards funding the health sector.
The tax was introduced to deter South Africans from buying and drinking sugary drinks in an attempt to decrease obesity-related illnesses, such as Type Two diabetes and strokes.
But economic experts are warning that if not carefully handled, the model could come a cropper with disastrous consequences. A case study is Denmark where the ‘fat tax’ as it was denoted, failed. The tax on saturated fat led to inflation, cross-border shopping, job losses and huge administrative costs.
“It had little effect on the consumption of saturated fat because Danish shoppers downgraded to cheaper brands from budget supermarkets, often in cheaper countries.
It did, however, clobber the poor as indirect taxes usually do,” said Francis Kamau, a partner at Ernest and Young.
According to the health expert, the government will also target alcoholic beverages, juices, salt, sausages, biscuits, sweets and chocolates besides junk foods.
The sector has suffered a great deal owing to under-funding from both the national and county governments.
In some counties, the health sector is on its knees while the referral facilities which are funded by the national government are also struggling to deliver services.
In Australia, citizens and residents are taxed two per cent of one’s taxable income to fund the public health system.
In South Africa, the sugar tax has generated a profit of 2.7 billion rands (Sh19.21 billion) in a little under a year since it was implemented, according to the latest Treasury figures.
Other nations that have implemented ‘fat tax’ with a considerable measure of success are Mexico and Hungary.
As the Health ministry seeks to discourage Kenyans from consuming sugary and junk foods, it wants people to turn to traditional foods whose content is not only cheap to produce but also healthy.
Contacted about the proposed model, National Assembly Health Committee chair Sabina Chege said it will be most welcome to help in supporting the ailing health sector and also boost UHC.
“It’s a good move because some of these foods are to blame for the rise of killer diseases in the country. In fact, it has succeeded in other jurisdictions Kenya has been lagging behind,” she said.
Treasury Chief Administrative Secretary Nelson Gaichuhie said the model can work in the country by increasing taxes to manufacturers of targeted products.
“The manufacturer will then pass the baggage to the consumer and this will deter consumption of the products,” he said.
Gaichuhie, however, said the Health ministry has yet to take the proposal to the National Treasury.
According to Kamau, the government must look into the factors that will be affected before implementing the model.
First, he says, many people already addicted to, for instance, alcohol and cigarettes will either turn to illicit brews or bhang to quench their thirst because they will not afford the products after taxation.
“It will affect this group’s saving as they will be forced to spend more for drinks and the puffs,” he adds.
Implementing the model
On the other hand, Kamau warned that some of the targeted products such as biscuits have nutritional value and if overtaxed, will in the long run affect the people.
For instance, both nutritional and sugary biscuits are medically approved for dehydrated people, the hungry and military personnel.
Kamau said the proposal is good in that it will address health problems facing the country, but added that stakeholders must be involved for it to succeed in a country whose citizens are among the most taxed in the world.
In 2016, the World Health Organisation urged governments to consider introducing a sugar drinks tax to curb soaring obesity rates in children.
A 2015 report by WHO, fiscal policies for diet and prevention of non-communicable disease 2015, showed that a tax of 20 per cent or more could lead to a drop in sales and consumption sugary drinks.