Obesity rates have been increasing over recent decades in all industrialised countries. Obesity is defined as the accumulation of excessive fat in the body. Therefore, this essay will provide an overview of current obesity rates in Australia, the estimated cost of obesity to the nation and five characteristics of desirable tax will be analyzed.

Firstly, an overview of current obesity rates in Australia. Figure 1 shows that the recent obesity rate is higher than before. According to figure 2, it shows that by 2025, a total of 4.6 million Australians (18.3% of the population) are projected to be obese

Secondly, the estimated cost of obesity to the nation. Table 1: shows that the financial cost of obesity in 2008 was estimated as $8.283 billion. Of this, 44% were productivity costs, 24% were health system costs, 23% were carers costs, 9% were DWL from transfers and 1% were other indirect.

Finally, the five characteristics of desirable tax on discourage the eating of unhealthy food. The first characteristic is economic efficiency. Economic efficiency is the principle of taxation that suggests that a tax system should not be distortionary (Frijters, Dulleck and Torgler. 2010). Obesity is inelastic demand, therefore, putting fat tax on unhealthy food is not efficient. It is as same as putting tax on cigarette. At the end same result will be appeared. Either eating unhealthy food or smoking, people will no change their habits very soon but it will affect a little on people.

The second characteristic is simplicity. Simplicity is defined as measured by administration cost and compliance costs (Frijter et al, 2010). This could be done in two ways: food types could be subject to the tax according to their fat or foods could be taxed according to the percentage of fat they contain (Leicester & Windmeijer, 2004). Compared with cigarette, government put the tax on the cigarette directly.

The third characteristic is flexibility. Flexibility is defined the principle of taxation that measures how easy and timely a tax structure adjusts to changes (Frijter et al, 2010). If fat tax on unhealthy food, people who eat everyday will keeping eating because it has become part of their life. Compare to cigarette, smoker need them every day as well.

The fourth characteristic is transparency. Transparency means the burden of payment is clear (Frijter et al, 2010). Fat tax on unhealthy food need to be transparent as same as the tax on cigarette.

The finally characteristic is fairness. Fairness means taxation should be fair to everyone (Frijter et al, 2010). According Leicester & Windmeijer (2004), a fat tax would be a unfair manner for some people. It is because not everyone has obesity problem. Tax on cigarette is more fairness than unhealthy food. It is because tax on cigarette only affect on those who smoke and those who never smoke will never affected.

In conclusion, tax on unhealthy food is not efficiency, complex, not flexibility, could be well transparency and it is not fair to everyone where tax on cigarettes is not efficiency, simple, not flexibility, could be well transparency and it is fair to everyone.