Institute of Economic Affairs Fat taxes in the EU Christopher Snowdon Institute of Economic Affairs

Set at 16 kroner (€2.15) per kg of sat fat The Danish fat tax Introduced October 2011 Set at 16 kroner (€2.15) per kg of sat fat Introduced to help reform income tax Predicted to give extra 3,800 years of life (5.5 days per person)

The Danish fat tax

The Danish fat tax

Unintended consequences Cross-border shopping The Danish fat tax Unintended consequences Cross-border shopping Shift to cheaper brands and stores Inflation Cost of living Regressive Administrative costs

The Danish fat tax Health impact? ‘The total sale of the included foodstuffs decreased by 0.9%. The fat tax was associated with marginal changes in population risk of IHD. One estimate suggests an increased population risk of IHD by 0.2% and the other estimate suggests that the risk of IHD decreased by 0.3%.’ Booker et al. (2015) ‘The Danish fat tax—Effects on consumption patterns and risk of ischaemic heart disease’, Preventive Medicine, 77: 200-03

EU food policies

Belgium, Finland, France, Hungary Planned Soft drink taxes In force Belgium, Finland, France, Hungary Planned Ireland, Portugal, UK, Estonia? Abandoned Bulgaria, Spain

Encourage reformulation Soft drink taxes Justifications Reduce consumption Reduce obesity Raise revenue Encourage reformulation

Action on Sugar formed in 2014 The UK campaign Action on Sugar formed in 2014 Paternalistic government under David Cameron Chancellor needed diversion in 2016 Portrayed as a business tax

Impact on prices ‘Food taxes and their impact on competitiveness in the agri-food sector’, DG Enterprise and Industry (2014)

Impact on consumption

Impact on obesity “…soft drink taxes do not appear to have countered the rise in obesity prevalence because any reduction in soft drink consumption has been offset by the consumption of other calories.” (Fletcher, J., D. Fisvold and N. Tefft (2010), ‘The effects of soft drink taxes on child and adolescent consumption’, Journal of Public Economics, 94 (11-12): 967-974)

Impact on obesity “Our research does not support the theory that soda taxes have a negative effect on body-mass index. Current soda tax rates range from two percent to 7.25 percent and it’s possible these may not be high enough to affect BMI. Further research that addresses consumption and includes data on local soda taxes is warranted.” (D. Fitts and A. Vader (2013), ‘The effect of state level soda tax on adult obesity’, Evans School Review, 3 (1): 74-91)

Impact on obesity “Together, our results cast serious doubt on the assumptions that proponents of large soda taxes make on its likely impacts on population weight. Together with evidence of important substitution patterns in response to soda taxes that offset any caloric reductions in soda consumption, our results suggest that fundamental changes to policy proposals relying on large soda taxes to be a key component in reducing population weight are required.” (Fletcher, J., D. Frisvold and N. Tefft (2014), ‘Non-linear effects of soda taxes on consumption and weight outcomes’, Health Economics, 10 March)

The Mexican experience Colchero et al. (2016) ‘Beverage purchases from stores in Mexico under the excise tax on sugar sweetened beverages: observational study’, British Medical Journal 352

The Mexican experience Mexico’s National Institute of Public Health (2016)

Conclusions Relationship between price and consumption is not in question, but… Demand for food and drink is (very) inelastic Significant substitution effects are possible and have been observed Such policies tend to be politically unpopular Sin taxes are almost invariably regressive No tax on food or soft drinks has yet been shown to reduce obesity

Conclusions

Institute of Economic Affairs Christopher Snowdon Institute of Economic Affairs Twitter: @cjsnowdon