Wednesday, October 01, 2008

Call to up tax on snack foods (A case of market failure?)

From Straits Times 1 Oct 2008

A parliamentary report released Tuesday has 70 proposals for fighting obesity, one of it being increasing taxes on snack foods.

PARIS - FRENCH lawmakers want to increase taxes on snack foods and cut taxes on fruits and vegetables to fight growing child obesity.

The health minister, however, says she doesn't like the idea.

A parliamentary report released Tuesday has 70 proposals for fighting obesity. One would hike taxes from 5.5 per cent to 19.6 percent on chocolate bars, chips and other 'snack foods.'

Taxes would be reduced from 5.5 per cent to 2 per cent on fruits and vegetables.

Health Minister Roselyne Bachelot says on Canal Plus television that obesity-fighting efforts 'should not go in that direction' and that such a tax would hit poor households at a time of economic downturn.

The report, which is not binding, also suggests banning transfats. -- AP

See also: Related article: Snack tax to combat obesity? ; and a detailed study by the USDA

Questions:
  1. Using economic analysis, explain why the government wants to intervene in the market for snack foods and vegetables.
  2. Evaluate the effectiveness of such a measure in solving the problem you identify in Qn 1.

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