Denmark scraps world’s first fat tax

Danish butter cookies, less divine post-tax?

About a year ago, the Danish government tested out a policy never before seen in the world. It implemented an across-the-board tax on all foods with a saturated fat content above 2.3 percent, with the hopes of reducing consumption of unhealthy foods.

But it didn't quite work that way. Some Danes did indeed switch to lower fat cheeses  and dairy products, The Wall Street Journal's Clemens Bomsdorf reports. But a lot of them simply began to do their grocery shopping internationally, heading to countries that didn't levy a fine on fat:

There is little evidence the tax impacted consumers financially, but it did spark a shift in consumer habits. Many Danes have bought lower-cost alternatives, or in some cases hopped the border to Germany, where prices are roughly 20% lower, or to Sweden.

The Sky supermarket located in northern Germany was one company benefiting from the trend. Last week, more than half the cars in the crowded parking lot had Danish license plates.

"We did not use to buy cheese here, but the price difference for our favorite type is now more than 30%," Anitha Nissen said, while helping her husband load groceries into their silver Suzuki. The Danish couple now crosses the border three or four times a year to stock up on goods.

The Danish government announced Saturday it would abolish the fat tax as part of budget negotiations there. Denmark's experience suggests one of the big challenges with regulating unhealthy foods: People can always switch to an alternative, that's a bit less expensive.

We've seen something pretty similar happen with nicotine use. As taxes on cigarettes have steadily increased, smokers have moved away from those products toward cigars and cigarellos, which tend to have a lower tax burden. 

At the same time, these types of taxes don't seem to be losing any traction: Just last week, French legislators began calling for a tax on palm oil, a key ingredient in the popular hazelnut spread, Nutella.

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Dylan Matthews · November 13, 2012

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