Fat and green taxation, inequalities and consumer response

Fiscal measures promoting healthier food and drink baskets have been implemented in various countries, with highly heterogeneous policy designs and mixed outcomes. A common objection to taxing foods to improve health is the potential regressivity of the measure since the budget share spent on foods and drinks is higher for low-income households, but the counterobjection is that these households are more likely to adjust their food choice, hence gaining larger individual health benefits. The idea of carbon taxation to promote more sustainable consumption has recently gained attention, including a proposal to revisit value-added tax rates according to the environmental impact of a good. This opens the way to various issues, making it hard to predict the ultimate consumption, health and environmental outcomes of fiscal measures applied to food and drink baskets. Among these open research questions is the signaling impact of multiple fiscal measures, the information overload faced by consumers and the benefits from environmental taxation. This chapter reviews these and other issues, drawing from existing evidence.