Editorial | Giving up an unbearable burden

The fat tax proved that higher prices have the power to sway on consumer spending habits, changing their consumption patterns may require other measures though

November 15th, 2012 10:05 am| by admin
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When Denmark implemented its tax on saturated fat last year, the world listened. Expressing an interest in this country not since the Mohammed cartoons were published, media outlets from around the world turned their eyes to Copenhagen to ask whether their countries could also implement a similar measure to combat obesity. 

The jury remains out on whether people actually reduced their fat consumption – businesses say we didn’t, while the only academic study so far says we might have. The evidence of the fat tax’s negative impact on the economy, meanwhile, is incontrovertible: it increased border trade and saddled businesses with a burdensome administrative procedure. 

Add to that the nearly two billion kroner the tax sucked out of consumers’ pockets over the past 12 months, and there’s no wonder it had little popular support. We wrote in our editorial just after it was implemented last year that the fat tax had the deck stacked against it: businesses were pre-disposed to hate it, nutrition experts questioned its effects and consumers correctly predicted that prices would rise beyond the actual amount of the tax. Despite its good intentions, the fat tax, it seems, was unable to overcome these defects.

Although we remain in favour of public measures to nudge people into acting healthier, the government did the right thing by eliminating fat tax. The government has yet to air new measures aimed at encouraging people reduce their consumption of unhealthy fat and sugar, but when it does, it should keep the lessons of the fat tax’s failure in mind.

Firstly, any measure should encourage people to eat right by reducing the cost of healthy foods. Not only would this potentially increase revenue through higher sales, it would also keep consumers at home, rather than sending them abroad to buy less expensive butter and chocolate. If Denmark is lucky, it could possibly even beat the Germans at their own game by attracting their consumers into Danish stores for a change.

Secondly, any measure the government passes should cast a narrower net. Taxing an entire nutrient group makes it all but impossible for consumers, no matter how health conscious they are, to avoid getting caught in a tax dragnet. Narrowly targeted measures, such as New York’s ban on over-size portions of soda, would seem better suited to swaying consumption, rather than just punishing it.

Given the potential for success for measures like the fat tax, we should be asking what went wrong, but, more importantly, we should be asking what comes next.

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