'PRO-HEALTH' TAXATION POLICY-WILL 'GOI' LISTEN?

Taxation is a powerful tool in the hands of governments vested with the responsibility of managing the affairs of the country. In India as per the constitution both the state as well as the central governments are empowered to impose taxes and financial levies. Currently excise duty, import duty, service tax, income tax and vat provide major resources for meeting the expenditure to run the governments and take up development projects. Taxation policies can play a vital role in encouraging or discouraging consumption of any materials by the population besides protecting domestic manufacturing sector from unfair imports. Of course under the WTO regime it is becoming increasingly difficult to put in place any protectionist policy that will affect the exports of other member countries with a redressal mechanism available to the members for addressing such incidences.

One of the most successful efforts in using taxation as a tool to discourage consumption is in the tobacco field and if current smoking trend is any indication, imposition of high taxes on cigarettes and other tobacco products is certainly a major disincentive against tobacco consumption including smoking. Same approach to alcohol consumption could not be as effective though the growth of the liquor industry did slow down on account of high prices caused by punitive rate of taxation. The politics associated with alcohol production and consumption can be held responsible for the survival of liquor industry because in states like Kerala the local government itself took up manufacture and marketing of low cost liquors for the benefit of "poorer" segments of society leaving high end products to the private sector! It is difficult to understand the logic of such an approach though the argument supporting low cost alcohol products points out to further "economic bleeding" of poor families if they are to depend on costly varieties offered by the private sector.

For a number of years GOI focused its attention on food products that are considered luxury oriented and in absence of a clear demarcation between luxury foods and common man's foods, most of the processed foods came under the first category attracting heavy taxation. Naturally such a policy made such foods unaffordable to a large segment of the population thereby stunting the growth of food processing industry during seventies, eighties and nineties of the last millennium. Introduction of VAT addressed this issue to a limited extent but leaving the states to decide on the items to be included under various VAT rates has created wide disparities in prices of same products in different states. Unless GOI takes a pro-active policy to bring all foods under a uniform tax regime this situation is likely to continue.

If we have to live with a situation where processed foods are taxed, why not make use of the policy to favor healthy foods? If we are convinced that high levels of consumption of sugar, salt and fat through processed foods needs to be discouraged and curbed, can we think of a taxation structure that will reduce their consumption through price differential brought about by higher taxation on such products? Is it conceivable that one pays more for a sugar based drink than that paid for a natural juice? Or high fat products are made costlier through appropriate taxation while low fat ones are made available at a lesser cost? Or low salt food products are exempted from taxes to attract more consumers? Or can the food products be classified based on nutrient density with those with empty calories being taxed heavily? What about corporate taxation incentives to encourage the industry to expand their product portfolio containing certain category of healthy foods? All these initiatives require massive technical inputs to GOI for arriving at a rational tax regime vis-a-vis processed foods. If there is a will and determination this is not beyond our reach.

The recent proposal by New York state in the US to impose a 18% tax on soft drinks, considered to be one of the culprits for American obesity was shot down because of strong lobbying by the industry. How far the new proposal being taken up by the US government to introduce punitive taxes nation wide on sugar products will succeed remains to be seen. Experts believe that every penny increase in the price of a 12 oz can of soft drink can reduce the consumption by 1% because of its high price sensitivity. Such taxation can contribute to foot the bill that country has to bear for programs aimed at fighting obesity and other health care projects. Same holds true for India also and it is time GOI considers seriously the health related problems waiting to become epidemic in the coming years due to increasing imbalances in food consumption.

V.H.POTTY
http://vhpotty.blogspot.com/

CORPORATE INCENTIVES FOR IMPROVED PUBLIC HEATH

More or less all agree that the health crisis facing the world to day is brought about by uncontrolled consumerism, thoughtless product expansion favoring obesity and CVD and mindless life style changes consequent to plenty of money in the hands of the consumers who do not exercise discretion in choosing foods that are good for them. From food industry's perspectives, the portfolio of products offered by them is based on their "saleability", not their health boosting ability and invariably these products have excellent organoleptic profiles liked and craved for by a majority of the consumers. It is true that a healthy product can never be as appealing as those rich in fat, sugar, carbohydrates, functional additives, natural or synthetic and made by not necessarily optimum processing conditions from health angle. A 100% nutritionally literate population can only demand healthy foods and the world is no where near that target yet. Most consumers are unaware of the consequences of over eating and eating of foods with 'empty' calories and they indulge in such foods for the sake of palate satisfaction. Under these conditions is it inevitable that world is left to its fate while those who have the wherewithal to arrest the trend ignore the writing on the wall non-chalantly?

Many nations do spend enormous money in supporting food programs that subsidize or offer free nutritionally balanced foods at least once in a day to stave off hunger and promote nutrition amongst some segments of vulnerable population. How far they serve the purpose is another matter. More over can a government take up the whole responsibility to protect the health of its entire population through bureaucratic muddles for which it is notorious? While supportive programs are useful when paid for by the taxpayer directly through the government for the benefits of most vulnerable population, who is going to "guide" the eating habits of well- to- do consumers? No matter how much voluntary efforts are channeled to promote consumption of' 'well-being' products, the impact is not likely to be dramatic. In India the food industry floated the grandiose organization called Protein Foods and Nutrient Development Association in sixties with the objective of promoting nutrition in a big way but very little has happened during the last 4 decades of its existence. In stead of resolving to voluntarily to manufacture 'well-being' products for the Indian consumers, the Association went for the all too familiar "seminar, workshop and symposium" mode for promoting the concepts for which there were no takers even amongst their own members!

It is in this context that one must admire the new initiative coming from the law makers of the US who wanted the industry to be roped in to promote well-being of, at least, its own employees. Taxation is a powerful tool in the hands of the governments to make or break the industry and it is unfortunate that many third world countries use taxation as a means of collecting revenues for profligate spending on non-productive activities. Under the new administrative dispensation in the US, a move is afoot to enact legislation that will give significant tax breaks to the industry if it promotes health and well-being amongst its employees. At present any welfare scheme promoted by an industry is not recognized by the government as bonafide expenditure in the balance sheet and the recipients will have to pay income tax on such special allowances. Thus if a particular industry reimburses to its employees expenditure on buying regularly healthy and nutritious foods, such payments are considered as part of the salary attracting taxes at the individual level. Under the proposed Bill being considered in the US these payments can be shown as valid corporate expenditure admissible for tax computation. Probably the US cannot delay such welfare schemes for long as its population is on the brink of a dangerous implosion of epidemic nature, caused by obesity, CVD, hypertension, diabetes, cancer and similar life style diseases.

Do we learn any lesson from the experience of this affluent country? Lulling ourselves into a false sense of comfort through garbled statistics which says we are far behind other countries as far these diseases are concerned, is a short sighted policy that can put our country in great peril in the coming years. Our taxation policy is most regressive and even food is not spared by both state and central governments as most of the processed foods attract one or the other tax making them dearer to the consumer. Repeated pleas during the last 6 decades by the industry and consumer groups to declare the food industry as a "zero tax" industry have fallen on deaf ears and how can we expect these governments to think in terms of a pro-active taxation policy to promote healthy foods? In stead of looking for luxury foods to slap taxes, it may be a better strategy to grade the foods based on their health protecting quality and besides exempting from all taxes, additional financial incentives should be offered for marketing such products. Dairy foods, low fat, low sugar and low salt products, high protein foods, nutritionally balanced products and others with stress on health must be exempted from the taxation net, irrespective of who buys them.

At the Corporate level the industry must be encouraged to put in place eateries exclusively for their employees manned by dietitians and nutrition consultants, enlist a product portfolio available in the market that are considered specialty health products and identify people with good health for special pay based on acceptable national health parameters like body mass index, effective control of illnesses, good dietary habits, regular health check ups etc. Such employees can be paid ex-gratia health allowance, all expenditures allowed as genuine corporate expenditure eligible for IT deduction.



V.H.POTTY
http://vhpotty.blogspot.com/