Budget 2016: no sweet taxes this year

Who would have thought that celebrity chefs could influence Governments to introduce new taxes?

Jamie Oliver has publically lobbied the UK Government to do this, and was quick to claim credit when it introduced a two tier levy on soft drinks from 2018. Unsurprisingly, Mr Oliver quickly identified further potential television markets, including New Zealand, and has extended his call further afield.

Health Minister Jonathan Coleman has said that New Zealand will not follow suit at this stage, due to a lack of compelling evidence to support the effectiveness of such a tax. These comments have disappointed general practitioners. A recent poll in NZ Doctor revealed that nearly 70 per cent of GPs surveyed disagreed with Dr Coleman and 84 per cent believe a sugar tax should be introduced in this country. Earlier this month, 74 public health academics collaborated to demand that Government introduce a 20 per cent tax on sugary drinks in the 2016 Budget. This group is supported by organisations such as the Heart Foundation and Diabetes New Zealand.

There is no doubting that that diets high in sugary foods have life changing health implications for many and this places pressure on the public health system. But we really have to ask ourselves if a sugar tax would actually change behaviours at consumer level.

If people truly crave these products, will they simply continue to buy them even if they do cost more? And will they sacrifice other important areas of their household budget causing other forms of deprivation?

If we look at other heavily regulated commodities in New Zealand, the answer to both questions is yes.

The Government's goal of making New Zealand smoke-free by 2025 includes annual 10 per cent tax hikes which started in 2010 and conclude this year. Since then, there’s only been an incremental decline in the number of Kiwis who smoke monthly - 20 per cent in 2006/2007 to 17 per cent in 2014/2015. The daily smoking rate is virtually unchanged since the New Zealand 2013 Census, and remains at 15 per cent.

And what about the role advertising plays in the promotion of unhealthy products?

In 1963 broadcasting authorities banned cigarette advertising on New Zealand television and radio; ten years later billboard and cinema advertising was banned. In 1974 the first health warning appeared cigarette packets, and in 2008, all tobacco companies were mandated to have graphic health warnings printed on all cigarette packages sold in New Zealand. These are some of the more significant initiatives among a whole raft of measures to discourage tobacco consumption.

In the more than half a century since the tax on cigarettes has skyrocketed and that first advertising ban was imposed, around 5,000 New Zealanders still die each year from smoking or exposure to second hand smoke – the equivalent of 13 people per day.

In the long term, modifying consumption behaviour requires more than financial disincentives. Education and increasing public knowledge levels are important tools. Schools have a key role in incorporating messages about healthy eating into the curriculum. Our devolved curriculum system gives schools the flexibility to teach subjects in ways that suit their students and community. We should encourage our schools to look to incorporate nutritional information into their curriculums. Several DHBs across the country have banned sugary drinks from sale at outlets within their premises. This is a good start to the public education process.

Consumers need to make informed choices about which products they consume rather than State directed decision making.

So it’s unlikely we’ll see a new sugar tax in the 2016 Budget. Despite heavy media coverage and opinion from a diverse group of pundits, it’s a politically challenging tax to enforce, and of dubious policy value.

However, if the issue is not addressed at all, New Zealand taxpayers will be funding the ever burgeoning health system that is treating people with lifelong disease potentially caused by poor food choices.

Whatever the current view of Government, it is inevitable that politicians will need to formally address the issue. In the meantime, we can watch the sweet, or not so ‘sweet as’ results in the UK.

Further enquiries, please contact:

Pam Newlove
Partner, Privately Held Business and Chair of the Grant Thornton New Zealand Board
T +64 (0)9 308 2579
E pam.newlove@nz.gt.com

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