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The Impact of a Fat Tax: Progressive in Health, but Regressive in Income?

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  • Tatiana Chudá
  • Petr Janský

Abstract

Health-motivated taxes have spread over the world to reduce increasing obesity and corresponding health care costs. These taxes have not yet been implemented in the Czech Republic, in contrast to some other, mainly European countries. However, the introduction of a fat tax has been discussed frequently in the Czech Republic during the last few years; here, we provide empirical evidence in order for this public debate to be better informed. We use detailed microeconomic data to estimate the impact of potential fat taxes on household expenditure and government revenues in the Czech Republic. We evaluate the impact of three types of fat taxes: ad valorem, specific per kilogram of product and specific per kilogram of fat. We simulate these in such a way that they all raise the same budget revenues as a 10% ad valorem tax on fat-rich products. Accounting for higher food expenditures in the aggregate national accounts than in the detailed microeconomic data results into higher budget revenues, 7.3 and 6.1 billion Czech korunas, respectively. Overall we find, and thus confirm the overwhelming evidence from other countries, that fat taxes are regressive in income.

Suggested Citation

  • Tatiana Chudá & Petr Janský, 2016. "The Impact of a Fat Tax: Progressive in Health, but Regressive in Income?," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(4), pages 445-458.
    • Handle: RePEc:prg:jnlpep:v:2016:y:2016:i:4:id:569:p:445-458
    DOI: 10.18267/j.pep.569
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    References listed on IDEAS

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    1. Cash, Sean B. & Lacanilao, Ryan D. & Adamowicz, Wiktor L. & Raine, Kim, 2008. "An Experimental Investigation of the Impact of Fat Taxes: Prices Effects, Food Stigma, and Information Effects on Economics Instruments to Improve Dietary Health," Consumer and Market Demand Network Papers 45499, University of Alberta, Department of Resource Economics and Environmental Sociology.
    2. Thiele, Silke, 2010. "Fat Tax: A Political Measure To Reduce Overweight? The Case Of Germany," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116393, European Association of Agricultural Economists.
    3. Petr Janský, 2014. "Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(3), pages 246-273, June.
    4. Ondřej Schneider, 2004. ": Who Pays Taxes and Who Gets Benefits in the Czech Republic," Working Papers IES 68, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2004.
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    More about this item

    Keywords

    tax policy; obesity; households; health; government revenues; food; fat tax; Czech Republic;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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