George Bull

Written by: George Bull

George Bull

Senior Tax Partner

Sin taxes on Sunday roasts?

The imminent publication of part two of the National Food Strategy has sparked speculation that the report’s author may propose a new tax to discourage meat and dairy consumption and so help the UK meet its ambitious climate change target of cutting emissions by 78 per cent by 2035. That would certainly be consistent with recommendations of the Climate Change Committee that food waste should be reduced by 20 per cent annually, and the consumption of beef, lamb and dairy by at least 20 per cent per person.

With government reports consistently emphasising that time is running out to tackle the climate emergency, it is difficult to fault the logic of these recommendations. Taxes such as alcohol duty, tobacco duty and the carrier bag tax have all been successful in reducing consumption. It would therefore be surprising if the second part of the National Food Strategy did not recommend the use of taxes to help achieve environmental objectives. But what objections might be raised before the government publishes its promised response early in 2022?

Starting at the beginning of the supply chain, many meat producers and businesses in the food industry have been quick to condemn the possibility of a new meat tax. The prospect of a tax-induced hike in retail prices, and therefore a reduction in consumer demand, is unwelcome. Nevertheless, many farmers feel that the impacts of climate change on their livestock and land, coupled with changing consumer tastes and the reshaping of farm subsidies, will in any event require them to change farming practices. If soil and other conditions permit, a tax-accelerated move away from meat and dairy production would not be beyond the ingenuity of British farmers who constantly have to adapt to changing conditions, accepting that many farm on land unfit for arable production, which needs to be considered.

Competition is also a factor. The recent trade agreement between Australia and the UK (with others to follow), has caused concern among many UK agricultural producers. Others to whom we have spoken recognise that, if producers cannot compete with Australian farmers who have shipped their produce halfway round the world, then that’s a poor reflection on UK agriculture. We can be sure that, having been roundly criticised for recent trade agreements whose terms only became known after they had been finalised and formally adopted, the government will be particularly sensitive to avoiding further criticism from the farming lobby.

Then there’s the question of how the tax should be collected. If it applied only to imported meat and dairy products, the UK would quickly find itself in dispute with other nations. If it applied only to UK suppliers, there would be an outcry. Meat tax would therefore have to be applied to all meat and dairy products wherever they originated. The wider the scope of the tax, the more difficult it is to arrange collection through the industry. There is a strong probability, therefore, that a meat tax might in practice take the form of a change in VAT rates on meat and dairy products. This could be collected via shopping bills at butchers, local shops, supermarkets and perhaps the catering and restaurant trade.

This brings us to the taxpayer. A new meat tax could have the greatest impact on the expenditure or eating habits of the lowest income groups. The first part of the National Food Strategy report did not pull any punches, so we may anticipate the second part to take a similarly robust view if a meat tax is recommended. Nevertheless, we can expect the government to be particularly sensitive to the circumstances of low-income families.

Where does all this leave us? It would not be at all surprising if the forthcoming report contained recommendations for a new tax intended to reduce the consumption of meat and dairy products. Whether the government’s subsequent response endorses that proposal is another question completely.

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