Supermarkets using fat tax to fatten bottom line

Price check reveals the prices of many products have been raised by rates higher than warranted by new tax

(photo: Stephen Wright)
October 31st, 2010 11:00 am| by admin

With the introduction of the ‘fat tax’ on the first of October, Danish consumers knew their wallets would be taking a hit on products such as butter, cream cheese, and other foods with high saturated fat content.

What wasnÂ’t known was that supermarkets would use the tax to fatten their bottom line.

A price check of eight supermarkets, carried out by weekly newspaper Søndagsavisen with co-operation from the Tax Ministry, revealed that prices on many fatty foods were raised significantly higher than warranted by the tax’s introduction.

Søndagsavisen’s price check compared the current prices of products including butter, margarine, various cheeses and creams with the tax authority Skat’s expected price increases and found that many products were priced at levels higher than what the tax warranted.

For example, while Skat calculated that the price of sour cream would increase by 6.6 percent due to the fat tax, the spot check revealed that at supermarket Aldi the price of sour cream was raised by a whopping 17.3 percent.

Aldi was the worst offender in the study, with Søndagsavisen finding that the supermarket raised prices on 9 of the 10 inspected products by more than what could be accounted for by the new tax.

At Kvickly, the price of butter was raised by 12.7 percent more than the tax could explain, and the price of cheese by 17 percent more. The supermarket Lidl increased the price of sour cream by 15.1 percent more than warranted by the tax.

“Supermarkets can determine their own prices, so it is not prohibited,” Vagn Jelsøe of the Danish Consumer Council told Søndagsavisen. “But it doesn’t look good.”

Many politicians agreed with Jelsøe, and in response to Søndagsavisen’s revelations have vowed to prohibit supermarkets from exploiting the fat tax.

“It is not acceptable to make an extra profit under the cover of the fat tax,” Social Democrat  food spokesperson Orla Hav said, according to MetroXpress newspaper. “We would like to take up a debate on whether there are ways to protect the consumer.”

Enhedslisten  food spokesperson Per Clausen also weighed in on the supermarketÂ’s pricing.

“It is absurd at these supermarkets take advantage of the situation to improve their profit margin,” Clausen said. “It is completely unacceptable.”

The national fat tax is an extra charge on food products with more than 2.3 percent of saturated fat. The charge amounts to 16 kroner per kilogram of saturated fat. Danish Agriculture and Food Council estimated that it will cost the average family with two adults and two children an extra 1,000 kroner per year if they continue to eat the way they did before the fat tax.

As the first tax of its kind in the world, DenmarkÂ’s fat tax has received significant international attention.

In related news, the Social Democrats (S) and Socialist PeopleÂ’s Party (SF)  have now given up their concept of ‘cross-financingÂ’, in which taxes on unhealthy foods and tobacco products would directly be used to finance improvements to the nationÂ’s health care system. The money will instead go into a general fund.

“The problem with [cross-financing] in the longer term may be what would happen if the finances either rise or fall. What would happen to the things you use the money for – should they also rise or fall?” S financial spokesperson John Dyrby Paulsen told Politiken. “We still have an element of ‘cross-financingÂ’ in that we will use the money for better welfare, social initiatives, education and research.”

Paulsen acknowledged to Politiken, however, that without a committed cross-financing there would be no guarantee that the government parties could deliver on the healthcare promises they made in their joint election manifesto, ‘A Fair Solution’.

(photo: Stephen Wright)
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