National Food Waste Tax Incentive: Boosting food relief through Australia’s tax system
This year on 29 September 2020 we celebrate the first ever United Nations International Day of Awareness of Food Loss and Waste.
It also comes during the global COVID-19 pandemic that has brought about a global wake-up on the need to transform and rebalance the way our food is produced and consumed.
In this light, we are pleased to present our report, which outlines why a National Food Waste Tax Incentive is needed.
The proposal would not only help many Australians in need particularly in a global pandemic but also help decrease food waste, promote sustainability and support businesses during tough times.
Australia has an extensive regime for the tax deductibility of charitable donations, but it does not presently provide tax incentives that specifically target food waste or food relief as a policy objective.
Under the current policy framework, donations of services for food transportation and logistics services, pallet hire and storage and refrigeration – all food relief services which are required in the food donation process – can only attract limited deductions in limited circumstances. This is a barrier to many companies from actively participating in food waste reduction and food relief in Australia.
Given the costs of immediately disposing food can be far lower than the cost incurred in donating food, and the tax deductions allowed for donating food compared to simply discarding food is the same in many instances, it is often more practical and cost effective for businesses to discard food rather than donate it under the current policy framework. As a result, the hunger relief and food waste reduction sectors currently experience difficulty in attracting donations of food and relevant services that are essential to their objectives.
To address these issues, we recommend a tax policy to optimise Australia’s food donation incentives by leveraging global examples of food donation policies, as well as the current tax incentive framework established under Australian tax law. The main purpose of this proposed tax policy is to achieve food waste reduction targets and alleviate the food insecurity experienced by many Australians.
A new incentive would support primary producers, processors, manufacturers, the logistics and transport industry, as well as other service providers who are committed to the alleviation of food waste and insecurity in Australia.
Globally, food waste tax incentives have been introduced in a number of other key global jurisdictions (including OECD countries) including the United States, the United Kingdom, France, Canada and the Netherlands.
In this report, we consider the tax incentives offered globally to put forward design options for the introduction of a specific food relief tax incentive in Australia.
There are two options for a specific food waste tax incentive to be implemented (the ‘National Food Waste Tax Incentive’). The first option has design features broadly in line with the current R&D tax offset with appropriate limitations and safeguards.
The second option would be for an enhanced deduction option similar to that adopted by the United States, which would provide the taxpayer with a choice to deduct 200 percent of the cost or 120 percent of the market value of goods or services provided.
If enacted, the proposed National Food Waste Tax Incentive would contribute materially to stimulating activity in the economy at a time when this is greatly needed. An incentive of this kind would support not only the donation of food, but would also potentially create important flow-on economic activity including job creation by stimulating relevant supporting activities and services.
We have estimated a National Food Waste Tax Incentive to have a direct cost to Federal Government revenue of approximately $50 to $100 million per annum which is minimal in comparison to the large offsetting social, economic and environmental benefits of approximately $2 billion per annum and against the current cost of food waste to the Australian economy of over $20 billion annually.
The National Food Waste Tax Incentive would also directly assist in achieving the 50 percent target for reduction of food waste in Australia by 2030 as announced by the Federal Government in the National Food Waste Strategy (i.e. to achieve the target of halving food waste by 2030), giving rise to large net social, economic and environmental returns for all Australians both now and into the future.
Read the report: Food Waste Tax Incentive: Food relief through Australia’s tax system