Magazine article New Zealand Management

King's "Fat Chance" Tax

Magazine article New Zealand Management

King's "Fat Chance" Tax

Article excerpt

If a "fat tax" is introduced to discourage people from getting fat, what would a "flatulence" tax accomplish? And what is FART all about?

Let's deal with the hot air first. Federated Farmers on July 25 launched a nationwide campaign, "Fight Against Ridiculous Taxes" (FART), urging the Government not to implement a flatulence tax. The Government did not intend to implement such a tax, strictly speaking, but the public were persuaded it did, and there was an outpouring of farmer fury--and a rush for membership of Federated Farmers from farmers fed up with growing compliance costs.

The Government released a discussion paper and said it was seeking feedback from the agriculture sector on the best way to levy dairy, sheep, beef and deer farmers to fund research into reducing greenhouse gas emissions from agriculture. Comment was sought on the levy mechanism and on the administration, function, structure and governance of a research body to manage levy expenditure. And yes, a levy is a tax.

The agriculture sector accounts for more than half of New Zealand's total greenhouse gas emissions but the Government's climate change policy exempted agriculture from "emissions charges" (or a carbon tax). In exchange it required the sector to be the main funder of research into reducing these emissions. About $8.4 million a year should do the trick.

Farmers won't be able to avoid the levy, which differentiates it from the "fat tax" advocated in health circles. This would be slapped on goodies deemed to be fat-enhancing, such as pies, Big Macs and the fries that accompany them. The high cost of fattening foods compared with--let's say--an apple would, supposedly, encourage consumers to opt for the apple.

Business Roundtable executive director Roger Kerr is among those who regard incentives as effective in changing people's behaviour. He quotes William Easterly, a former World Bank economist who says economics is only about incentives: "All the rest is commentary."

Kerr questions the Clark Government's understanding of incentives. When it came to office, it was concerned about levels of student debt and responded by making loans interest-free while students studied. Presumably it thought this would not alter incentives to borrow. Student debt mushroomed. …

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