We have shown that a 20% tax on junk food would save more lives than a sugar tax

Every Australian shopper is familiar with the throngs of cheap junk food on supermarket shelves. Meanwhile, the prices of fresh fruits and vegetables are rising.

So it’s no wonder conditions like obesity and type 2 diabetes are so common, and Australia’s healthcare system is struggling to cope.

But what if policies helped level the playing field? And what will this mean for our health and health care costs?

Our new research, published today in Lancet Public Health, estimates that a 20% tax on unhealthy foods could prevent 212,000 premature deaths and save $14.9 billion in health costs over the lifetime of older Australians.

We hypothesized that the health effects might be even greater if the tax revenue were used to subsidize fruits and vegetables.

What we did

By “unhealthy foods”, we mean sugary drinks, lollies, salty snacks, biscuits, pastries, processed meats and ice cream. These are the types of foods that Australia’s Dietary Guidelines say we should limit for optimal health. Yet many Australians find their resistance tough.

We’ve modeled how this 20% food tax could change the way Australians shop. This can be a 20% tax on the retail price or a 20% tax applied at the point of production (excise tax). But our modeling did not specify the type, only that the price would increase by 20%.

We also modeled the effect of ticket on weight, blood pressure and chronic disease over the lifetime of adults aged 20 or over in Australia.

We then speculated what would happen if we used this income to subsidize fruit and vegetables, and what additional health benefits it would have.

We also looked at how these effects might differ for households across the socio-economic spectrum – from the poorest 20% to the richest 20% – to see how taxes and subsidies might affect people in different financial situations.

What we found

We estimated that a 20% tax could reduce unhealthy food purchases by about 8–26% depending on the category.

This could lead to 660,000 fewer cases of type 2 diabetes and 787,000 fewer cases of heart disease among Australian adults alive today. In turn, this could prevent 212,000 premature deaths.

The economic returns can be significant. We estimate a total reduction in health care costs of $14.9 billion. That’s a health care cost savings of $781 for each adult over their lifetime.

While the average Australian could pay about $139 more in tax each year, the policy could help make Australia fairer: low-income Australians could experience almost 76% more health benefits than high-income Australians. This is because low-income Australians bear the greatest burden of diet-related disease and could see the greatest reduction in unhealthy food purchases.

So this measure will reduce the disproportionate burden of obesity, diabetes and heart disease that are most affected.

The revenue raised would also be enough to reduce the average cost of fruits and vegetables across the population by 19-26%. This could reduce the cost of life stressors, prevent 194,000 more cases of heart disease and prevent an additional 45,000 premature deaths.

Implementing a tax and subsidy together will not result in a net cost to the government.

How does this compare to the sugar tax?

You may have heard of “sugar tax” proposals that would tax sugary drinks. This is the method endorsed by the World Health Organization.

But we estimated that extending these taxes to unhealthy foods more broadly could deliver about seven times the health benefits.

Similarly, the tax and subsidy package we modeled could have a much larger impact than giving health star ratings, limiting junk food advertising, reducing harmful ingredients (such as salt) in products, or running a national healthy eating campaign.

This does not mean that a tax and subsidy package alone will address the enormous personal and health care costs of unhealthy eating in Australia. But our findings reinforce its potential to be a powerful policy lever that the government should consider.

However, we know that price is a strong driver of the food we buy.

what now

Australian politicians are debating a tax on sugary drinks. This is a good start, but our findings suggest that Australia should consider a broader system of taxes and subsidies for greater impact.

Public support for such measures is strong. Around 53% of Australians support a tax on unhealthy foods, rising to around 72-74% if the revenue is used to subsidize fruit and vegetables.

Subsidies can be delivered through existing channels. These include the use of vouchers, through school programs, retail subsidies in First Nations communities, and healthy food prescription programs.

Advocacy from health and community groups can help implement policy. In Colombia, such persistent advocacy led to the introduction of a 20% tax on unhealthy foods. Evidence suggests that it improves the population’s diet without affecting jobs in the food industry.

Australia has had similar discussions before. Tobacco tax, once controversial, has contributed to a major reduction in smoking while funding initiatives such as the Victorian Health Promotion Foundation.

With unhealthy diets and being overweight now causing more chronic disease than smoking, we should consider equally sensible measures – including food taxes and subsidies – to help Australians act on their best intentions at the supermarket.