The new tax being imposed on manufactured goods that contain sugar – products such as jams and ketchup – will cause companies to layoff employees and, in some cases, completely shut down factories.
Seven out of ten food manufacturers surveyed by Dansk Industri (DI) said that they will be forced to cut their number of employees when the tax takes effect next year. Fully one third of those surveyed said they will layoff one out of every ten workers.
The survey of 32 companies included some of the country's largest food manufacturers like Arla and Danish Crown. Altogether, the companies employ about 5,000 people nationwide.
"Businesses cannot take anymore," said Ole Linnet Juul from DI. "First a fat tax and now a sugar tax. Does the government just want companies to shut down?"
DI fears that as many as 1,200 manufacturing jobs could be at risk.
Business leaders also fear that jobs in the retail sector will disappear as shoppers cut back on buying sugared foods in Denmark due to higher prices created by the tax and opt instead to head across the borders to Germany or Sweden to stock up.
"More expensive goods drive trade out of the country," said Lotte Engbæk Larsen from Dansk Erhverv, the Danish chamber of commerce. "Prices go up, and cross-border trade increases."
The chamber estimated that around 700 jobs were lost when the government raised taxes on candy, alcohol and tobacco.
It is still not clear how the new levy on sugar in foods like yoghurt, ketchup and jams will be calculated, but the government says it it expects to earn more than one billion kroner from the tax each year.
Food manufacturer Beauvais fears that the tax will cause the price of a jar of jam to nearly double and could cause the company to shut down their Danish factories.
"We fear that our volume will be hit so hard that we will no longer be able to maintain production in Denmark," said the company’s information director, Elisabeth Voss.
The tax minister, Thor Möger Pedersen (Socialistisk Folkeparti), said he didn’t believe that the tax will result in plant closures. He said the levy will be the same on Danish and imported goods.
"There will still be significant demand for the products that fall under the tax," said Pedersen. "It is a smaller tax than the one on chocolate and sweets."