What the world can learn from Denmark’s failed fat tax

November 11, 2012

The Danish tax ministry announced Saturday that it's scrapping a fat tax it introduced in October of last year, saying the measure has only increased companies' administrative costs and caused Danes to venture across the border to purchase their unhealthy snacks.

Evy Mages/ for the Washington Post
Evy Mages/ for the Washington Post

"The fat tax and the extension of the chocolate tax, the so-called sugar tax, has been criticized for increasing prices for consumers, increasing companies' administrative costs and putting Danish jobs at risk," the Danish tax ministry said in a statement Saturday. 

The country's fat tax added 16 kroner ($2.7) per kilogram of saturated fats in a product, and was levied on everything containing saturated fats, including raw ingredients like butter and milk to prepared foods like pizzas. 

The price of a half-pound of butter, for example, rose by 2.20 kroner, or 37 cents, but apparently the larger problem was the administrative headache food companies had to endure in order to set the new prices. 

The Danish tax ministry said it was also cancelling plans to introduce a tax on sugar, the AFP reported.

It's an interesting development at a time when the United States and other countries are attempting to steer consumers to healthier choices with their own counter-obesity policies.

Last year Hungary instituted a 50 U.S.-cent tax on fatty foods, plus higher tariffs on soda and alcohol, with the proceeds going to health care costs. Last week, senators in France called for a tax on foods with palm oil, a levy that has been termed the "Nutella tax" after the beloved chocolaty spread that would become pricier as a result.

Israel also is weighing a junk food tax, and in the U.K. Prime Minister David Cameron said he was considering a fat tax similar to Denmark's, referring to the United States in a local TV interview as a cautionary tale.

"Look at America, how bad things have got there – what happens if we don't do anything? Yes, that should be a wake-up call," Cameron said.

In the United States, New York is leading the charge in the war on fat by prohibiting artificial trans fats in restaurant foods, slapping calorie labels on eatery menus and, most recently, adopting a controversial ban on oversize sodas in restaurants, which is now working its way through the state's courts. Local policymakers in Washington also have tossed around a similar soda measure. 

It's hard to predict whether these laws will actually improve public health, though, or if they'll go the way of Denmark's failed policy.

New York's trans fat ban, which was implemented in 2006, did reduce trans fat consumption significantly, according to a 2009 study that found that the percent of restaurants using trans fats had decreased from 50 percent to less than 2 percent. But calorie-labeling on restaurants menus hasn't changed consumer purchasing decisions significantly, despite being replicated in cities across the country.

Meanwhile, tobacco research has shown that smoking rates have dropped off dramatically after cigarette prices rose nearly 50 percent in the past decade, and other food studies have concluded that a 10 percent tax leads to about a 10 percent reduction in calories consumed of the taxed product.

In Denmark, the tax might have become too unpopular because it was seen as hurting food businesses. The Danish Food Workers Union told Food Navigator recently that the measure had led to a loss of 1,300 retail and manufacturing jobs there.

Denmark's obesity problem is also far less severe than U.S.'s: 13 percent of Danes are obese, according to the Danish National Health and Medicines Authority, compared with more than 35 percent of Americans, so the consequences of abandoning the fat-tax initiative are arguably less dire there.

It could also be that Denmark's tax was just high enough to become a nuisance for manufacturers -- and to act as an incentive for cross-border cookie runs -- without making a significant impact on how people actually eat.

A May British Medical Journal study found that "fat taxes" would have to increase the price of unhealthy food by as much as 20 percent in order to cut consumption by enough to reduce obesity, and they should be paired with subsidies on fruits and vegetables so consumers don't swap out one unhealthy habit for another.

 

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Max Fisher | November 10, 2012