Farm Ireland

Tuesday 20 November 2018

Could meat be the next food to face taxes?

Could meat be facing a levy?
Could meat be facing a levy?
Margaret Donnelly

Margaret Donnelly

Meat could be the next commodity to face levies, as a new report says governments may look at taxing it to balance the books.

The Livestock Levy report looked at whether meat may be the next product on the list for balancing budgets and revenue creation.

Practically every government in the world faces challenges when it comes to balancing their budgets, and an increasingly attractive target for revenue creation is a tax on goods deemed to be unhealthy or damaging to the environment or both, the report says.

For example, over 180 countries now impose a tax on tobacco, 60 jurisdictions tax carbon and at least 25 tax sugar.

Meat taxes are already on the agenda in Denmark, Sweden and Germany, and although no proposals have advanced into actual legislation, long-term investors should take note of the compelling arguments being made, especially in Denmark and Sweden. It was in the Nordics that the first carbon tax was introduced in 1990.

It goes on to say that in the global livestock production sector, sustainability megatrends and changing dietary patterns driven by a growing global middle class are creating enormous challenges.

Population growth has driven up up global meat consumption by over 500pc between 1992 and 20161 and this trajectory is likely to continue in the future, especially in emerging markets. For example, demand for meat produced in Asia alone is predicted to grow a further 19pc in the 12 years to 2025.

However meeting this growing demand has proven a difficult endeavour for the global livestock industry, and in recent years the sectors has been linked with a range of environmental, health and social problems. This includes emerging evidence connecting meat consumption with greenhouse gas emissions that exceed emissions from the transport sector.

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Further, aan increasing incidence rate of global obesity and associated higher risks of type 2 diabetes and cancer along with increasing levels of antibiotic resistance and threats to global food security and water availability along with soil degradation and deforestation are putting pressures on meat.

The pathway to taxation typically starts when there is global consensus that an activity or product harms society. This leads to an assessment of their financial costs to the public, which in turn results in support for some form of additional taxation. Taxes on tobacco, carbon and sugar have followed this playbook.

A 2015 report from the World Health Organization (WHO) classifying processed meat as carcinogenic echoes similar reports on the harmful effects of tobacco and sugar; while the work of the University of Oxford quantified the potential cost savings from reductions in meat consumption, echoing the UK’s Stern Review in 2006 – which first made the case to invest now to mitigate climate change or risk paying much more later.

The report goes on to say that meat taxation is not a short-term risk for investors, but that large pension funds and asset managers would be remiss not to put it on their agenda. As the international community works to implement the Paris Agreement and the UN Sustainable Development Goals, governments and other international institutions will need to create a pathway to a more sustainable global food system – meat taxation may well feature on that road.

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