Thursday, November 14, 2013

Why a ‘fat tax’ won’t work in Singapore


12 Nov 2012

By Jeremy Lim

Taxes on sugared drinks and other unhealthy food have been in the media spotlight recently.

Mexico, recently crowned the fattest country in the world with 32.8 per cent obesity among adults, pushed through price increases of 8 per cent for junk food. The Mexicans will also add one peso (about S$0.10) to the price of a litre of sugary drinks.

Over in the United Kingdom, a British Medical Journal paper modelling the effects of taxes on sugary drinks suggested a 20 per cent tax would reduce the number of obese adults by 180,000 and those who are overweight by 285,000.

Closer to home, University of Melbourne academic Rob Moodie has called on the Australian government to do likewise, saying that, without the taxes, Australian children were at risk of becoming the world’s fattest.

What are the economics behind such taxes? Simply, the argument is that higher prices will drive down demand and hence shift consumers to healthier options. In Mexico, the tax revenue collected will be used for health programmes, increasing public benefit.

Furthermore, most health systems are publicly funded to some extent and proponents argue that these taxes help to recover some of the future costs the state will bear for health burdens of the obese.

“Sin taxes” have been used successfully in tobacco control and advocates have sought to transfer some of the lessons to other sectors. But it has also been argued the analogy is flawed: There are no redeeming elements in tobacco, and food is much more complicated; few types of food are completely bad for health and few completely good. The “everything in moderation” line of reasoning is intuitively appealing.


Do taxes on unhealthy food make sense in Singapore? Well, higher prices in theory should drive down demand but, before we pop the champagne — which, interestingly at 89 calories per 120ml glass, is proportionately even higher than Coca-Cola — and celebrate a blow against “big food”, let’s pause to consider the perhaps unique setting here.

Higher prices will lower demand — but this may not be accompanied by healthier food choices. A substitution effect is to be expected, but not necessarily with multigrain bread and salads; these may continue to be too expensive for the average consumer.

Furthermore, Singapore — unlike America, which is dominated by big food outlets — has a plethora of hawker centres and food courts with self-employed hawkers serving up local fare.

Let’s say we tax McDonald’s, leading to the consumer passing on the Filet-O-Fish (390 calories) and French fries (small serving = 230 calories), choosing instead chicken rice (607 calories). The difference in calories? A meagre 13 calories.

Giving up the Ben & Jerry’s vanilla ice cream (260 calories) for a chendol (382 calories)? Oops, you’ve just added 122 calories.

The point is that, in Singapore, the easy targets, the McDonald’s and KFCs, are not the only purveyors of unhealthy food.


But surely all unhealthy food should be taxed consistently? Three factors will likely sway policymakers.

We Singaporeans are rightly very proud of our rich culinary heritage. Laksa, char kway teow and nasi bryani (with chicken) have all at various times been championed as heritage food. At 696, 742 and 877 calories per serving (the daily recommended intake for a woman is 2,000 calories), these are worthy contenders for the dubious crown of most unhealthy food.

Impose taxes on our cultural icons? I think not.

Then there is the issue of who such taxes are trying to protect. Lower-income Singaporeans, unlike their well-off brethren who can toggle unhealthy food choices with healthier salads and soups, often have no choice but to eat at hawker centres as these offer some of the cheapest, albeit not the healthiest, food in Singapore. If we consistently tax all unhealthy food, we penalise hawkers and low-income consumers.

Finally, depending on the recipe, the caloric count of common dishes such as laksa can vary considerably. Soya instead of coconut milk? Braise rather than fry the spice mixture? Where and how do we draw the line?

Taxes on unhealthy food, so strongly advocated in other countries, may not be appropriate for Singapore. Hawkers and small operators serve up as much “unhealthy” offerings as “big food” and the operational challenges in differentiating “healthy” from “unhealthy” food consistently are formidable.

If clumsily applied, the very tax intended to protect Singaporeans’ health may ironically lead us to even more unhealthy options.


Obesity is and will remain a major public health challenge for Singapore and many other countries. However, policy instruments that work well in one setting may not be directly transferable. Careful study of the local context is essential before blindly copying “best practices”.

What then should Singapore do? Singapore has very sensibly averred from blunt taxation and instead embraced a holistic national healthy living plan championed by Parliamentary Secretary for Health Muhammad Faishal Ibrahim.

When it comes to food choices, planners have carefully considered an ecosystem approach. Measures include moving upstream in food choices to design healthier ingredients such as wholegrain rather than white rice noodles, encouraging cooked-food sellers’ use of healthier ingredients such as brown rice and, instead of wielding a blunt “stick” to punish unhealthy food, using discounts in supermarkets and cooked-food outlets to encourage healthier options.


Jeremy Lim has held senior level executive roles in the Singapore public and private sectors, and is the author of “Myth or Magic: The Singapore Healthcare System”.

[Let's say we agree with ALL his arguments. You can still tax soft drinks. Fat. Salt Sugar. Of these three, Sugar can be the most easily controlled in soft drinks. Whack the tax on it. Soft drinks are produced by big corporations. Poor people should and would not drink so much of it. And even if some hawkers are hawking homemade soft drinks that may have as much or even more sugar than commercial soft drinks, so what? Their reach is insignificant compared to the commercial players with their mega-advertising budget.

I was very surprised that a bottle of coke (500 ml) costs about NZ$3.50. That's about 3 times the costs in SG. I believe it is the taxes. It was so expensive, it made more sense to drink wine over there. But I digress. We can and should tax soft drinks to reduce the sugar intake.]

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