30 Nov 12 Denmark drops fat tax
Gone, by popular demand: Denmark’s fat tax. ‘The fat tax is one of the most maligned we [have] had in a long time’, said Mette Gjerskov, the Danish food and agriculture minister, announcing the decision to ditch the policy. ‘Now we have to try improving the public health by other means.’
The tax – more accurately a saturated-fat tax – came into force in October 2011 and added 16 kroner (about £1.70 / US$2.70 at current exchange rates) per kilogram of saturated fat in any product that contained more than 2.3 per cent saturated fat.
According to the OECD (the Organisation for Economic Co-operation and Development), that worked out as ‘equivalent to up to 30 per cent more for a pack of butter, eight per cent more for a bag of chips, and seven per cent more for a litre of olive oil’.
Denmark isn’t alone in adopting food taxes in recent times. Hungary also introduced a tax in 2011 on manufactured foods that are high in sugar, salt or caffeine where a ‘healthier alternative’ exists. Basic foods are not affected. Finland introduced a confectionery tax in 2011, but pastries, buns and biscuits are exempt. (That tax has since been cut by 25 per cent.) The Finns also have a soft-drink excise duty of 7.5 euro cents per litre and a similar drinks tax now applies in France.
It turns out, unsurprisingly, that slapping taxes on things doesn’t necessarily persuade people to consume less of them. So Danes either went downmarket in their buying habits by buying cheaper products, or popped across the border to Sweden or Germany to buy their fatty foods there instead.
The only real effect was to hit the profits of Danish companies. Chastened by the experience, the Danish government has also scrapped plans for a sugar tax, too.
As the OECD notes: ‘The impact of imposing taxes on the consumption of certain foods is determined by the responsiveness of consumers to price changes, ie, price elasticity. However, it is difficult to predict how consumers will react to price changes caused by taxation. Some may respond by reducing their consumption of healthy goods in order to pay for the more expensive unhealthy goods, thus defeating the purpose of the tax.
‘Others may seek substitutes for the taxed products, which might be as unhealthy as those originally consumed. Depending on the elasticity of the demand for the taxed products, consumers will either end up bearing an extra financial burden, or changing the mix of products they consume in ways that can be difficult to identify.’…..