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Taxing fresh foods could have a big, bad health impact

A simmering discussion about Australia’s goods and services tax (GST) flared up again straight after the election, with WA Premier Colin Barnett arguing for an increase in the GST rate and a broadening…

Consumption of fruits and vegetables can be expected to fall if their price goes up. shaun/Flickr

A simmering discussion about Australia’s goods and services tax (GST) flared up again straight after the election, with WA Premier Colin Barnett arguing for an increase in the GST rate and a broadening of the tax’s base.

Absent from the discussion so far is how broadening the GST base might impact public health. In a letter in this week’s Medical Journal of Australia, my co-author and I reported on the potential health impact of removing the GST exemption for fruits and vegetables.

What we found

In our study, we built on earlier work on the cost-effectiveness of prevention. For that research, we had developed models that mimic the 2003 Australian adult population in terms of health, health-care expenditure, and, among other things, fruit and vegetable consumption.

If the price of fruits and vegetables were to go up by 10% (the current level of GST), consumption can be expected to go down by about 5%.

Our modelling suggests that, over time, this could lead to around 90,000 extra cases of heart disease, stroke and cancer; this might cost between $0.5 billion to $1.8 billion to treat, on top of a loss of 60,000 to 145,000 healthy life years. One healthy life year is the equivalent of a year in full health, and losses can be due to reduced quality of life while living with disease, or due to being dead.

That’s a big health impact, comparable to a 10% extra tax on tobacco or a 30% tax in alcohol.

But all this is hardly surprising, given that less than 6% of Australians manage the recommended levels of fruit and vegetable intake. Small changes in risk for many people can add up to a large effects at the population level.

Ample reason, we concluded, to explicitly consider the potential health consequences in any review of the GST - such as the one currently planned by the government.

What our critics say

Our work was published on Monday, and has garnered some interesting reactions.

Our estimates of consumption change rely on studies from the United States, but “Australians are different”, Grattan Institute chief executive John Daley argues.

While it is true that Australian evidence is highly desirable but as yet unavailable, there seems little reason to think that Australians are any less sensitive to prices than Americans.

Waistlines hardly differ, and the disease burdens due to insufficient consumption of fruits and vegetables rank very similarly in both countries.

The editor of the MJA professor Stephen Leeder thinks that larger price changes may be needed before much effect can be demonstrated. But that would depend on the level at which the effects are measured.

A 5% change in consumption might be distinguishable from the inevitable noise in the data. But changes in the frequency of diseases take place over a long time, in which many other factors also impact on the same variables. So, proving a link with a modest change in taxes is very difficult.

But that doesn’t mean they aren’t there; just that they are hard to measure. Models can help us to order the evidence and logically calculate through the most likely consequences.

Another criticism was from RMIT University professor of institutional economics Sinclair Davidson, who doesn’t remember a big substitution away from fast food toward fresh food when the GST was introduced. But “from memory” hardly counts as evidence.

In its excellent position statement on food taxes, the Cancer Council rightly recommends we study changes in taxes that affect food more in depth.

Health impact assessment

Professor Leeder thinks the scenario we examined is implausible. But while it’s comforting to think the GST exemption on fruits and vegetables won’t be abolished, I get a different impression from reading what economists say.

Among economists, broadening the GST base is very much on the agenda. The Henry tax review explains that exemptions make the tax more expensive, and more onerous to implement - especially for small retailers.

Removing the exemptions has been recommended by academic economists, industry-funded think tanks, and the OECD, among others.

From a public health perspective, removing the GST exemption for fruits and vegetables may be something that’s simply “not done”. But apparently, from a narrow economic perspective, things look different.

As Sinclair Davidson rightly notes, the current GST is akin to a “fat tax”: it encourages healthy behaviour, as fast food is subject to the tax and fresh food is not.

Our study suggests it works very well and delivers large health gains.

The government would do well to think twice before making changes to the tax. Such interventions have health effects, and proposals should come with a thorough, independently executed health impact assessment.

Join the conversation

28 Comments sorted by

    1. Henry Verberne

      Once in the fossil fuel industry but now free to speak up

      In reply to Peter Ormonde

      Hi Peter,

      I agree. What may be "good" for the economy is not necessarily good for consumers.

  1. rory robertson

    logged in via email

    Dr Veerman,

    I doubt that any government will ever step up and extend the GST to fresh foods. As a stand-alone measure, such a move would generate much more backlash than revenue. So it's simply not going to happen, in my opinion

    I note the 'Australians are different' argument in your piece above. I agree with your assessment that we should be cautious about such claims. What's interesting is that the University of Sydney's highest-profile obesity expert on Monday made a similar argument, in…

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  2. Rosemary Stanton

    Nutritionist & Visiting Fellow at UNSW Australia

    I was involved in extensive discussion and lobbying to exempt fresh food when the GST was originally introduced. At the time, wholesales sales taxes (ranging from 12.5-22%) were applied to items such as confectionery, soft drinks, cakes, biscuits and snack foods. This made it an easy mechanism to switch these foods to a GST. The packaged food industry was generally happy with this, because the GST was lower than the previous taxes. (Did anyone notice prices dropping? I thought not, and I wouldn't…

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    1. Paul Prociv

      ex medical academic; botanical engineer at University of Queensland

      In reply to Rosemary Stanton

      It makes a lot of sense not to have GST on fresh fruit and vegies, while upping it on processed foods. It would convince us that our government takes population health seriously. Which probably means it won't happen, and the tax will be introduced!

    2. rory robertson

      logged in via email

      In reply to Rosemary Stanton

      "Nutritionists are unanimous that we need to do everything we can to increase consumption of fruit and vegetables". Not quite unanimous, Rosemary. It's worth noting that a basic low-carb diet - which embraces green leafy vegetables but not much else in terms of fruit and (starchy) vegetables - appears to have been the most-effective obesity-reversing diet over recent centuries:

      Growing numbers of nutritionists and other scientists are embracing that basic low-carb diet as something that can make a major contribution towards reversing the disastrous global trend towards obesity, type 2 diabetes and related maladies.

    3. Rosemary Stanton

      Nutritionist & Visiting Fellow at UNSW Australia

      In reply to rory robertson


      You quote Gary Taubes - a journalist as your source.

      I prefer to look at Dietary Guidelines that are put together by groups of nutrition/health experts. I don't know of any DGs from any country that don't extol the health benefits of fruit and vegetables.

      The Australian Dietary Guidelines recommend 2 pieces of fruit/day. (The evidence report is available online.) Only 1% of Australian 14-16 year olds achieves that and 95% of the same group fail to meet the recommendations for vegetables…

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    4. John Wright


      In reply to Rosemary Stanton

      Surely the key here is the 'processing' element. Irrespective of where people sit on the low carb, low fat debate, all commentators appear to agree that quality fresh food is a key component to good nutrition. Singling out fruit and veg to be GST free undermines the drive for consumers to make healthy food choices.

      I agree however that increasing GST in other areas is the most economical form of tax raising, however there needs to be effective protection for low income earners as GST increases will have a disproportionate impact.

    5. rory robertson

      logged in via email

      In reply to Rosemary Stanton


      I can assure you that my kids each day eat plenty of fresh meat, vegetables, fruit and not much else. They are lean and strong. I don't take much notice of the ADG's particular five (veges) and two (fruit) servings advice, as I doubt it is based on anything convincing. After all, there once were a range of healthy hunter-gatherer populations who barely touched either.

      And while I greatly admire your indefatigable efforts since I was a child to improve public health, I'm not sure that…

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    6. Rosemary Stanton

      Nutritionist & Visiting Fellow at UNSW Australia

      In reply to rory robertson


      Please forgive me if I don't answer all your points as I have limited time available. My reference to Gary Taubes was intended as a counter to your statement that growing numbers of nutritionists and other scientists were embracing low carb diets. I was making the point that Taubes is not a nutritionist.

      I happened to be with colleagues in the US a few years ago after they discovered that Gary Taubes had misquoted them or quoted them out of context (there was some discussion of this in…

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    7. rory robertson

      logged in via email

      In reply to Rosemary Stanton

      Rosemary, my statement above that "Growing numbers of nutritionists and other scientists are embracing that basic low-carb diet as something that can make a major contribution towards reversing the disastrous global trend towards obesity, type 2 diabetes and related maladies" was not a reference to Gary Taubes (one guy). To be sure, many of those hundreds/thousands of nutritionists and other scientists globally may indeed have be influenced by Taubes's work, given that I've not seen anyone convincingly…

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    8. John Wright

      logged in via LinkedIn

      In reply to Rosemary Stanton

      Thanks for making the NAH poster available. The data seems to contrast completely with NHANES, regarding fat consumption since the 1970's. Even allowing for the under reporting that NHANES is known for there is not selective nutrient under reporting. The data for this poster appears to come from the Department of Agriculture, who are not entirely known for their objective evidence based approach.

      A cynic must also query the objectivity of a poster that starts with the paragraph, "The good news: beef hasn’t been this low since the 1950s. That may cut the risk of heart
      disease and colon cancer and help curb greenhouse gas emissions."

      Maybe this needs to appear in the BMJ piece on "peer review standards"

    9. rory robertson

      logged in via email

      In reply to rory robertson

      Running out the door, I mangled that final sentence. Apologies. On your excellent link above, Rosemary, I note that the main chart shows steep increases in US intakes of both "Caloric Sweeteners" ("Sugar, corn syrup, etc") and Grains between 1980 and 2000. That lines up neatly with the explosion of obesity over the same timeframe:

      I'm not saying Taubes's "Carbohydrate Hypothesis" is proved. There's plenty of other interesting…

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    10. Matt Stevens

      Senior Research Fellow/Statistician/PhD

      In reply to Rosemary Stanton

      I think we can safely sat that approximately 95% of australians do not follow the guidelines, particularly in relation to fruit and vege consumption, as the last national health survey found. Are 95% of australians suffering then for ignoring these guidelines? I somehow think not!

  3. Helen Kinmonth

    PhD Student, Population Health at Australian National University

    There is another reason why governments are considering extending the GST to fruit and vegetables when only around 6 per cent of adult Australians eat enough to ameliorate their risk of most major chronic diseases. While the health policy focus is on obesity to reduce chronic disease it will always focus on the individual and so will the solutions. This locks food and physical activity into the role of sub-problems that are also overwhelmingly about individual choice. If obesity was dumped as…

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    1. Rosemary Stanton

      Nutritionist & Visiting Fellow at UNSW Australia

      In reply to Helen Kinmonth


      Many of us were disappointed at the National Food Plan. It was a business-as-usual plan that gave scant attention to future needs of the land or the people.

      Overwhelmingly, many of us think we need to shift the attention to the obesogenic environment in which we live. Taxing particular items could assist to alter consumption and production.

  4. James Jenkin

    EFL Teacher Trainer

    'Sinclair Davidson ... doesn’t remember a big substitution away from fast food toward fresh food when the GST was introduced. But “from memory” hardly counts as evidence.'

    Yes, it was a sloppy thing to say.

    But Lennert, in the interests of rigour, have you checked it out? Did the introduction of the GST have any effect on the purchase of processed and fresh foods?

    1. Michael Hay


      In reply to James Jenkin

      James, it has been shown,notably in the tobacco industry in past decades, that a price increase affects sales for about 3 months. The consumption then reverts back to its normal position. In that industry, the anti-tobacco advertising, the altered packaging and the social disquiet did more to reduce smoking than did the price hikes.
      So with the GST. An increase in fruit prices will only have a minimal effect. Pro-fruit advertising (done well) will have more effect on an increase in fruit intake than anything else. Funny, but there is a large % of our population who are swayed by advertising.
      At present, with our studied non-protection of fruit and vegetable growers from the depredations of imported goods, it would help Australian growers if a strong push were made to promote Oz-Grown fruit and veges - we cannot wait for pie-in-the-sky politicians to be realistic. A strong push for local fruit and veges would easily overcome the effects of a GST increase.

  5. Mike Brisco

    Scientist at Flinders University of South Australia

    To conclude that Barnett's remarks will not produce a greater good, for more people - look no further than his job.

    Sorry to sound cynical. Barnett is a senior politician, belonging to a major party. Thus what he says, will aim solely to further his own interests, or his party's interests. I doubt he thinks any further than that.

    Remembering, of course, Hanna Arendt took quite a few people to task, for "failing to think"....

  6. Roslyn Mulcahy

    Social Worker

    Very sound point made by Peter Ormonde - the farmer knows best!
    Fresh food is vital to us all in terms of managing our health and ensuring long term insurance from the otherwise inevitable complex and chronic health conditions of the current ageing population.

    The baby boomers are heading down this pathway also. Affordability of fresh foods will stem the flow of patients into our health system and hospital beds. And the related conditions such as dementia. It is the vulnerable and poor in…

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  7. Alexander Rosser


    I am all in favour of extending the GST to not only fresh food but to all the other GST categories such as medical, safety, education, etc etc goods and services. Any simplification of our grossly over-complex tax system is welcome.

    Far better to promote health and well-being with subsidies; subsidies funded by the broadened tax base. So subsidise fruit and veg but not meat and eggs for example. Subsidise preventative medicine funded by GST on medical supplies and services.

    Subsidies are highly visible, are easily varied, and can be targeted where they offer the best value for money. GST exemptions are hidden subsidies and administratively expensive as well. Damm you Democrats for saddling us with the current system!

    1. John Wright


      In reply to Alexander Rosser

      How is a GST exemption more administratively expensive, than a subsidy?
      If I levy GST on an apricot, but wish to subsidise the apricot to promote consumption, who receives the subsidy and how is the subsidy delivered? If the subsidy is not to be targeted, perhaps even means tested, what would be the value in the exercise.

      As an aside why would you believe fruit and veg are any more beneficial for health and eggs and meat?

    2. Michael Hay


      In reply to John Wright

      Subsidies on individual items would be an accountant's delight. Much better to increase the no-tax threshold or apply a social security upgrade for those who pay no tax. There are actuaries who devise such things, so 'no probs, mate '

  8. John C Smith


    GST is a very bad tax. The fact that lots of countries have them is no reason to believe in it. GST or similar taxes on consumption and production are impediments to wellbeing of all of us.

    Let us remove this bad tax that is bad for the poor as the poor and the rich pays the same amount of tax.

  9. Andrea Shoebridge

    logged in via Facebook

    As an organism, we individually need fresh food and water to survive. To tax the fundamentals of life is extortion, we can exert no choice as to whether we eat and drink. Processed and/or packaged foods, on the other hand, do offer choice (between brands and whether to buy fresh or processed) and are products of the commodified, taxable, world. If not the food itself, then the packaging and costs of its processing create exposure to the GST. Never mind the advantages of fresh food for individuals and health budgets, it would be unconscionable to tax that which is vital for life, that we have no option to avoid

    1. Michael Hay


      In reply to Andrea Shoebridge

      There is one vital thing which we can do. Support community markets.
      If there are none - create one. With respect to the Farmers' Market Organisation, a market does not need to be a highly controlled affair.
      Collect a few producers to set up stalls to sell freshly harvested produce on a suitable site. If the sellers wish to purchase gazebos or umbrellas, they may; if the organiser wishes to charge for his/her organisation, then so be it. Other than that it is a free market with no bureaucratic foolishness.
      And it offers fresh produce with no middlemen or retailers - just growers, their friends, relatives or anyone else who wants to be community minded.
      Easy !