NCPA - National Center for Policy Analysis

Danish Government Rescinds Its Unwieldy Fat Tax

December 3, 2012

Many of Denmark's farmers, retailers and shoppers were glad to hear the government announce it would abolish the unpopular tax on saturated fats after only being in place for one year, says the Economist.

While the goal was to reduce consumption of unhealthy foods and improve the overall health of citizens, the tax had several undesirable side effects.

  • The tax's advocates wanted to hit things like chips and hot dogs, but it was applied also to high-end fare like specialty cheeses -- one gourmet cheesemaker cut his range of products when his creamy Danish blue saw a price increase of 25 percent.
  • Moreover, 48 percent of families simply went to neighboring countries to stock up on fatty foods.
  • The value of these cross-border trips was nearly $1.8 billion.

Specialty stores were especially hard hit. Supermarkets, for example, could keep prices of foods like meat and cheese down by spreading the cost of the tax around. However, local butchers and cheesemakers had to increase the price of their products, which lowered overall sales.

Furthermore, the tax as applied to meat was problematic. It was imposed per carcass and not per cut, which meant that lean cuts of meat faced the same increase in prices as a fatty burger.

While many people celebrate the elimination of the tax, there are some that continue to advocate for it.

For example, the Danish Medical Association argues that it is necessary for public health and should be kept despite economic concerns. They further argue that one year was not long enough to gauge the full impact of the tax.

One study showed that three months after the tax was imposed, sales of margarine, butter and cooking oil had fallen by 10 percent to 20 percent. However, some argue that the data is skewed because people either stocked up on those goods before the tax was implemented or went to another country to make those purchases.

Source: "A Fat Chance: The Danish Government Rescinds Its Unwieldy Fat Tax," The Economist, November 17, 2012.


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