Prague Economic Papers 2016, 25(4):445-458 | DOI: 10.18267/j.pep.569

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

Tatiana Chudá1, Petr Janský2
1 Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Prague, Czech Republic and CERGE-EI, an institute jointly operated by Charles University in Prague and the Economics Institute of the Czech Academy of Sciences
2 Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Prague, Czech Republic and CERGE-EI

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.

Keywords: tax policy, obesity, households, health, government revenues, food, fat tax, Czech Republic
JEL classification: D12, H20, I18

Published: January 1, 2016  Show citation

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Chudá, T., & Janský, P. (2016). The Impact of a Fat Tax: Progressive in Health, but Regressive in Income? Prague Economic Papers, 25(4), 445-458. doi: 10.18267/j.pep.569
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