Editorial: Govt right to avoid complex tax on sugar

There is no excuse for failure to feed children properly and control their sugary treats. Photo / Jason Oxenham

Public health campaigners have made quite an effort this year to persuade the Government to introduce a selective tax on sugar. They have not succeeded. The latest plan to tackle childhood obesity announced by the Minister of Health on Monday does not include taxes on soft drinks or sugar generally. They were never likely to succeed.

Taxation, to the extent that it raises the price of a particular item, is undeniably effective. Every time taxes on tobacco have been increased, more people have decided to kick the habit. The Law Commission is convinced, probably rightly, that a great deal of the harm caused by alcohol could be reduced if beer and wine was taxed more heavily.

But the use of taxation to change people's behaviour carries fiscal risks that are also damaging to the public good. The most obvious, though it seems to elude those who call for them, is that "vice taxes" will reduce the Government's revenue to the extent that they are successful. Their advocates may think that would not matter very much because they are additional taxes and the revenue they reap would be expendable. But governments budget on their entire expected income and if taxes from one source fall drastically, they cannot easily reduce their spending.

They also damage the integrity of the tax system. New Zealand is widely acclaimed for the simplicity and integrity of its taxation. This is mainly thanks to our consumption tax - GST - that levies the same rate on all sales of goods and non-financial services. It is not riddled with exemptions, which makes it easy for traders to apply and consumers to understand. It is the only sales tax applied to most goods with the exception of petrol, alcohol and tobacco.

Those are fairly easy exceptions to recognise. Not so sugar, or salt, or fat, or other food ingredients that some public health campaigners would like to tax. The task of defining what foods containing those should be taxed, and how much of the taxable content they contain, is likely to result in all sorts of anomalies and confusion. It could be done, of course, but it would require an army of bureaucrats and inspectors and still we would probably end with a system of arbitrary and inconsistent liabilities.

Small parties such as the Greens and NZ First can court popularity with selective taxes and propose GST exemptions because they are unlikely to face the practical problems of implementing them. No so the Labour Party. Labour's leader Andrew Little was sensibly cautious on the question of a sugar tax yesterday. Labour would not rule it out, he said, because he would use it as a threat to hold over the food industry if it did not voluntarily reduce the sugar it sold to children. But he acknowledged the technical difficulties of taxing this sort of commodity.

Neither main party, fortunately, is likely to compromise the tax system to reduce a problem that can be solved far more simply by parents, caregivers and consumers themselves. There is no excuse for failure to feed children properly and control their sugary treats. And for adults, surely it is a matter of personal responsibility.