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

2. 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)

3. The Danish fat tax

4. The Danish fat tax

5. 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

6. 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:

7. EU food policies

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

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

10. 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

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

12. Impact on consumption

13. 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): )

14. 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)

15. 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)

16. 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

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

18. 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

19. Conclusions

20. Institute of Economic Affairs
Christopher Snowdon
Institute of Economic Affairs