Businesses call fat tax a failure on all fronts

Levy costs millions of kroner and has not resulted in consumers making healthier choices, say food producers

If you're heading across Funen, expect huge delays (photo: iStock)
November 10th, 2012 7:47 am| by admin
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Denmark's surcharge on the fat content of foods has cost businesses 200 million kroner since it was implemented last October, according to Dansk Erhverv, a business advocacy group.

“The tax has been expensive,” chamber spokesperson Lotte Engbæk Larsen told Jyllands-Posten newspaper. “Businesses have had to absorb the costs of administration, set up new IT systems and explain it all to customers and suppliers.”

Larsen said that the red tape was the only thing to come from the levy, since it did not encourage customers to pick less fatty food.

“There have been absolutely no health benefits gained from this tax,” said Ole Linnet Juul, of DI Fødevarer, a food industry advocacy group.

Arla, the nation’s largest dairy, said Danes were consuming just as much milk, cheese and yoghurt as before; they are just choosing cheaper, and perhaps even less healthy, varieties and the government is actually collecting less money as consumers buy down instead of less.

“No one has gained anything from this tax and people aren’t consuming less fat, “said Arla vice-president Peter Giørtz-Carlsen.

Snack-food producer Kim’s, meanwhile, reported its bottom line grew by nearly seven percent last year, in spite of the fat tax making its products more expensive.

“I would like to see any research that shows the fat tax works,” said Kim’s managing director Kim Munk. “On the contrary, the market for crisps and snacks is growing.”

Food producers are responsible for calculating the fat content of foods and collecting the levy, but Munk and other business leaders have decried the procedure.

“It has been another obstacle to doing business,” he said.

Every 100 kroner the state has collected from the unpopular tax has cost the food industry 10 kroner to administer, and businesses said that the money lost discourages development and innovation.

“The tax has required many man-hours, and in these times of crisis businesses cannot afford to hire additional staff. The easiest way to cut costs is to cut back on product development,” said Larsen.

Larsen said that everybody loses when companies fail to develop new products, because new product development helps stimulate job growth.

The fat tax and a similar surcharge on sugar, which is set to come into effect in January, are key negotiating points in the government’s current budget talks. Main opposition party Venstre, which in 2009 was responsible for initiating the legislation that led to the passage of the fat tax, now argues that businesses are losing out as consumers choose to do their shopping across the border in Germany or Sweden.

The government has said it would agree to eliminating the taxes in exchange for increasing the lowest tax rate by 0.3 percent to 4.64 percent, in order to make up the lost revenue.

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