Aylesbury Grammar School

Finalist from the UK

Supermarket Excursion Tax (SET)

To effectively reduce virus transmission, we wanted to target the sector with the highest percentage of cases linked to it. According to PHE, 19% of coronavirus cases came from supermarkets – and this is a huge underestimate, because data came from the NHS Test and Trace App, which was mandatory in many places but not in supermarkets.

Therefore, we came to our solution: a flat tax of £10 on all in-person supermarket transactions. The survey we conducted to investigate the impact of our tax shows that this would cause supermarket visits to fall by 89% (and by 81 % relative to the 2020 lockdown) while raising approximately £600 million in monthly revenue.

There are two socio-economic groups that must be considered in more detail to avoid being targeted unfairly. To avoid harming older people who may be unable to shop online, we propose an exemption for people over 70 between 7am and 9am, the quietest hours of the day. Meanwhile, we believe low income families who might be unable to afford the tax could still shop online – in 2012, 80 % of prospective benefits claimants were connected to the internet (ONS) and this figure is rising rapidly, with 98 % of the UK online (ONS). As a last resort, however, analogue options such as telephone/filling out a form in paper for an order would be available. Finally, food banks would of course be exempt.

So, why £10? It offers the best compromise between a reduction in visits and affordability, with a £5 SET not reducing visits enough while £15 was too unaffordable given the relative lack of a reduction in visits compared to £10.

A key consideration in terms of the implementation of our tax is how to cope with the online order demand. Initially we would call on the army, which was also used during COVID, as part of the Military Aid to the Civil Authorities measure. Then, the tax revenue would be used to subsidise the construction of more delivery vehicles, and also in retraining schemes to increase the number of delivery drivers across the UK, many of whom would be those who had lost their jobs due to the pandemic.

Although the tax is somewhat regressive, we want to stress that it is much, much less regressive than the alternative of lockdowns, which led to a 38 % increase in unemployment (ONS), primarily in lower-skilled jobs.

We feel that the SET only negatively impacts the largest franchises, as it is not applicable to small stores or businesses. These large franchises are the best placed to adapt to the changes while still making a profit, with the supermarket giant Tesco making a £551 million profit during the first six months of the COVID pandemic alone. For nearly everyone, this tax would be much better than the lockdown alternative.

Our idea has also taken on board feedback from MPs on both sides of Parliament, making it politically feasible. This has informed and improved the SET, making it a more viable solution in the future.

So SET up for the future to save jobs and save lives.

Their YES! topic

How can we set Taxes, instead of Lockdowns, in order to Reduce Deaths during Pandemics?

by Arijit Ghosh (RWI)

Governments have a large role to play during pandemics given that disease transmission leads to an externality problem. Simply put, viruses like SARS-CoV-2 can be spread easily from one person to another. The mechanism is exactly the same as in the case of climate change: an externality problem exists with carbon emissions since such emissions from one factory can endanger the lives of many, even though they may not have received any gains from the emission activity or chosen to undertake it themselves.

In the presence of negative externality problems, economists prescribe two standard tools: taxes (price instruments) or quotas (quantity restrictions). As a result, a carbon tax is a price instrument and a ceiling/cap placed on the quantity of CO2 emissions is a quota or quantity restriction. When it comes to pandemics, lockdowns are therefore quantity restrictions because Governments can use them to restrict the quantity of social interactions among people. However, an important policy tool in the fight against pandemics can be to induce monetary costs on social interactions with the help of taxes. An important benefit of such taxes is that Governments can collect the funds and then redistribute them among people. A recent paper from economists at the University of Chicago, Princeton, and the London School of Economics looks into the technical and theoretical aspects of such a tax.

The objective of this YES! Team would be to work on a design for a tax on social interaction during pandemics. As a first pass, the team would consider disease transmission data from COVID-19 and focus on a country level case study, for example Germany or the United States.

Our main task would be to arrive at a policy design that Governments can use to levy taxes on externality generating behavior such as social interactions during pandemics, for example going to the cinema or restaurants, meeting friends, attending sporting events at stadiums, etc. Some ideas for generating taxes in this context can be designing taxes through bluetooth tracking via apps such as the Corona-Warn in Germany or taxing those goods which enable recreation and social interaction, such as meals in restaurants, tickets to sporting events, or airline tickets. Another important task for the YES! Team would be to arrive at an estimate of how much tax revenue can be collected under different scenarios and different levels of social interactions. This would allow for quick analyses on how well the tax revenue can be redistributed.

The team would have to address public attitudes to taxes on social interactions. At face value, lockdowns can economically hurt the poor much more than the rich. The same goes for taxes. Taxes can be more easily paid off by the rich than by the poor. Moreover, people can also have questions on data security: therefore, this has to be very seriously taken under consideration too.

Arijit Ghosh

Photo: Arijit Ghosh

Arijit Ghosh works as a researcher and doctoral candidate at the RWI-Leibniz Institute for Economic Research. His primary research interest lies in applied microeconomics in spatial contexts. He is also interested in the broad areas of regional and urban economics as well as public economics.