′Fat tax′ gains weight in Europe | Business | Economy and finance news from a German perspective | DW | 10.10.2011

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'Fat tax' gains weight in Europe

Denmark's new 'fat tax' aims to curb rising obesity rates by making unhealthy foods more expensive. Now other European governments are considering following suit. Can taxation really change people's behavior?

Fat bellies

If European leaders have their way, fat bellies are history

Denmark has become the first country in Europe and possibly the world to levy a tax on saturated fat, adding to an earlier ban on trans-fats and the introduction of a "sin" tax on sugary items like soda and candy.

Beginning this month, Danes pay an additional 16 Danish kroner (2.15 euros) per kilogram of saturated fat in any food item that contains more than 2.3 percent of the substance.

Put simply, the tax adds 9 cents to a bag of chips, 21 cents to a small package of butter and 30 cents to the price of a hamburger.

Battle of the bulge

The Danish government says saturated fat is a major cause of cardiovascular disease and cancer. It hopes the tax will help reduce obesity and increase its citizens' life expectancy. Equally important, it wants to halt the spiraling costs associated with treating these ailments.

British Prime Minister David Cameron

British Prime Minister David Cameron also wants to change British eating habits

The move has parallels in other parts of Europe. In September, Hungary imposed a tax on all foods with high fat, sugar and salt contents - as well soft drinks and beer. The expected annual proceeds of 70 million euros will be invested in health care programs.

The tax addresses Hungary's obesity rate of 18.8 percent, which is more than 3 percentage points higher than the European average of 15.5 percent, according to a 2010 report by the Organization for Economic Cooperation and Development.

Romania and Finland have been debating a similar fat tax for months. And just a couple of days after the Danish fat tax came into effect, British Prime Minister David Cameron said he, too, was considering similar legislation to tackle growing obesity levels in the country.

Drastic action, Cameron said in a televised interview, is necessary to curb soaring health costs and persuade consumers - as well as producers - to change their habits.

Divisive issue

Some Danes applaud the new tax. "I think it's a good idea to use taxes as a means to persuade people to change their behavior because most individuals can't change their habits without some pressure or incentive," said Finn-Juul Hansen, a Dane who operates a translation firm in Copenhagen. "I think it's generally a good idea to tax consumption rather than income."

Person eating a hamburger

The Danish fat tax adds nearly 30 cents to the price of a hamburger

Other Danes beg to differ. Ole Linnet Juul, food director at Denmark's Confederation of Industries, said the tax scheme is fundamentally flawed.

It's a bad idea because the way it has been introduced is absolutely not transparent for the consumer and causes a bureaucratic nightmare for companies," he told Deutsche Welle, pointing to a complex formula that takes into account the amount of fat used to produce a particular food and not the amount that is in the final product.

The tax, Linnet Juul argued, will only encourage Danes to cross the border and purchase even more goods in Germany and Sweden than they already are.

Taxing behavior is, indeed, a sensitive issue and opinions vary widely on its effectiveness.

Keep'em coming

"There is substantial evidence showing that taxation is very cost-effective when it comes to tobacco and alcohol," Monika Kosinska with the Brussels-based European Public Health Alliance, wrote in an e-mail response to Deutsche Welle's queries.

"Regarding food, fiscal measures need to encourage the consumption of healthy options and reduce unhealthy options on the market. Taxing foods which have negative impacts on people's health is one of many steps."

And one many food producers certainly fear. "The food industry is based on one assumption: it wants customers to come back," said Tam Fry of Britain's National Obesity Forum. "By lacing their products with succulent ingredients like fat, sugar and salt, (food producers) are guaranteed success."

While Fry said he prefers "straight-forward regulation" of the food industry, he admitted such regulation is difficult on a global scale and accepts taxation as the next-best alternative.

Stethoscope and euro bills

European governments are growing worried about obesity-related health care costs

"The fat tax may be unfair and unpopular but it will certainly make people sit up and take notice," he told Deutsche Welle. "It's a shock treatment but a necessary one to cure an epidemic."

Sour note

If many experts laud taxing consumption to curb bad habits, nearly just as many loath it and point to other problems it may cause.

"The effect of taxes on tobacco resulted in an uncontrolled market with a dramatic increase in the illegal import of untaxed cigarettes," Christoph Sokolowski from the German Federation for Food Law and Food Science, wrote in an e-mail. "And taxes on 'Alcopops' (sweet mixed alcoholic beverages) led to a switch in consumer demand for other alcoholic drinks."

Brussels-based lobby group FoodDrinkEurope described the concept of taxing food and drink as a step in the wrong direction.

"(The tax) places increased stress on less well-off members of society who spend a greater percentage of their income on their weekly shopping," it said in a statement. "Consumer information and education, not tax, is the way to advance consumer understanding of healthy eating."

An overweight man in a canoe

German authorities say sport and dietary discipline are key to combating obesity

Healthy diets and exercise

The German government appears to agree. "There is no discussion of introducing a penalty tax for food presumed to be unhealthy," a spokesman from the Federal Ministry of Food, Agriculture and Consumer Protection told Deutsche Welle. "We aim to focus instead on educating consumers about healthy diets and exercise."

Anita Käding from the German Tax Payers Association said she also opposed the idea of a fat tax in Germany.

"The primary function of a tax system is to give the state a means to generate revenue," she told Deutsche Welle. "As soon as it is used for other purposes, such as curbing the consumption of something like saturated fat, it becomes unnecessarily complicated and difficult to understand for citizens."

Author: John Blau
Editor: Sam Edmonds

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