Taxing life's little pleasures

In the past couple of months, I have heard two proposals which sent a shiver
down my spine. The first is a proposal from a GP to tax chocolate. The second
was the chief medical officer’s plan for a minimum price for a unit of alcohol.

Both, it is suggested, would have positive benefits for our health ­ I call
them sin taxes. If we accept that, for a politician, the art of good taxation is
to pluck the proverbial goose with the minimum of hissing, sin taxes are
attractive. Tax increases are justified as being in the public good.

Let me concentrate on the proposal to tax chocolate. Taxing selected
foodstuffs would be very complex ­ making it expensive to collect and, in many
cases, practically unenforceable. Taxing chocolate would be objectionable
especially because it could start the state on the slippery slope of interfering
with personal freedoms and choice. What next ­ a chewing gum tax because people
who drop it make the pavements sticky?

If we really want to tackle the problem behind the GP’s proposal, we could
introduce taxation based on fatness. People with a body mass index (BMI) of 25
or less could be tax free. A BMI of 25 to 30 (slightly overweight) would face a
‘fat tax’ of £100 per person. This could easily raise an extra couple of billion
a year.

People with a BMI of 30 to 35 might face an annual tax of £500 and anyone
heavier than this would face a punitive £1,000. Taxation on this model is
unrelated to the ability to pay, so a better model might be to vary the rate of
tax on the individual’s income.

Thin people might be taxed at rates, using 2011 as an illustration, of 20,
40, 45 and 61.5% (yes 61.5% is the top marginal rate announced by Alistair
Darling for 2011), but larger people might face higher rates. A formula of
raising the tax rate by 1% for each unit above a BMI of 25 has the potential to
encourage self regulation of weight.

But could this be enforced and collected? Citizens would refuse to be
weighed and would underestimate their true weight. Tax evasion would be endemic.
Visits to saunas, severe laxatives and chronic dehydration would all be used to
fool the scales. Such a tax would also probably violate human rights.

When politicians suggest taxing certain behaviours, citizens should be well
advised to protest. Complacency could lead to the erosion of civil liberties, a
poorer quality of life and even social unrest.

Derek Allen, director of taxation, ICAS