After it was mentioned in one of my classes, I started wondering… what exactly happened to the much-heralded tax on goods high in saturated fats that Denmark installed at the beginning of 2012?
This law was the first time that this relatively drastic step to curb obesity and try to steer healthier eating habits was implemented in practice. Public health scientists had long lamented that unhealthy food is too cheap compared to more healthful alternatives, especially considering the ‘external costs’ of increased health care costs that rising obesity rates would eventually lead to. The theoretical solution: if you make unhealthy goods more expensive, people will buy less and make different choices now that relative price is not pushing them in the wrong direction. In economics, this could be considered the ‘nudge’ theory – in the face of so-called ‘market failures’ (when the private market doesn’t accurately reflect social costs of certain behavior), so the theory goes, politicians can intervene and add some nudging of their own to bring consumers to more socially desirable behavior. The lesson that Denmark taught the rest of the world, though? Consumers don’t really appreciate being nudged.
After several months of public health excitement (“finally somebody is implementing what we have been calling for for years!”), talk about the fat tax died down until the topic was in the headlines again in November; however, this time it was to announce that after a sole year, Danish lawmakers decided to abolish the tax again. The measure had been peppered with complaints, making it “one of the most criticized we had in a long time” according to Mette Gjerskov, the minister of food, agriculture and fisheries. According to news articles published at the time, the law had suffered from several seemingly irreversible flaws:
- It failed to target what it set out to do. While it was supposed to make cheap unhealthy food such as hamburgers, chips and other fast food more expensive, the blanket implementation (an across-the-board tax on all food products containing more than 2.3 percent of saturated fat content) meant that specialty cheeses, bakery goods, or lean sirloin steaks (because the fat content was measured per carcass of meat, not per cut) were hit equally as hard.
- This also meant that a lot of especially smaller producers and retailers were losing out. Either people just bought low-cost (and probably lower-quality) alternatives, or they went to big supermarkets that could spread the tax across a variety of products instead of being limited to just a few products like the butcher around the corner.
- In addition, lawmakers didn’t factor in the proximity to other shopping opportunities – many consumers just crossed the border into Sweden or Germany to get their cheeses and ice cream there. According to one analysis, 48% of Danish went cross-border shopping, and the total value of such purchases increased in 2012 by 10% to $1.8 billion.
- Finally, the purpose and end goal of the tax seems to have been very poorly communicated, or else the general public just doesn’t see the trade-off between long-term and short-term costs the same way policy-makers did. What we do know is that this attempt to influence consumption behavior was deeply unpopular and seen as an intrusion of a ‘nanny state’ in the personal freedom of choice. Conversely, the tax did raise $216 million in new revenues that had to be replaced after its abolition – the NYTimes reported this would be done through “a small increase in income taxes and the elimination of some deductions“. Thus, most consumers probably didn’t save any money overall anyhow, even if they didn’t see it on their grocery bills anymore.
Did it have any effects? As most scientists pointed out, a year is too short really to do some serious impact analysis; yet, a preliminary study by Copenhagen University found that “sales of margarine, butter and cooking oil had fallen by 10-20% over the previous year. But these data, said sceptics said, were skewed by hoarding in the run-up to the legislation as well as by cross-border shopping in its wake.“
So what lessons can be drawn?
Economists often love the idea of imposing taxes and giving subsidies to “correct market failures”, as they say. And in theory, changing the incentive structure of certain behavior definitely sounds appealing – I was just myself discussing the need for taxes on resource use and carbon emissions, subsidies on sustainable behavior such as organic food production, energy-neutral housing etc. with my friends. I guess what we have to remember is that we are dealing with humans, not rational homo oeconomicus creatures we can try to steer at will. Treating people with respect – for their choices, their opinions, and their input – and trying to change with them, instead of trying to change them, might be the only way to arrive at real societal transformation towards a healthy, sustainable future.
What is your opinion on policy involvement to further societal aims – be it public health or sustainable development?
It is one of the reasons that hard measure work in Australia (like anti-smoking campaigns) is that people cannot simply pop across the border 🙂
One of the other reasons is the -anti-carb brigade where carbohydrates are now seen as the big nasty instead of fat.
Haha I guess Australia is a pretty good petri-dish for policy measures from that point of view – same with the US, actually, except for the border regions. Would be interesting to look at whether they have in general had more effective policy impacts that could be due to geography 😉
I also have a problem with the fundamental premise of taxing ‘fat’ as a method of discouraging obesity. I am obviously not a nutritionist but consumption of high fat food is not necessarily the main/only driver of obesity. People think that reaching for the ‘low fat’ yogurt is the healthy choice but if that same yogurt is chock full of sugar, which they often are, then a healthier choice has not been made. So by taxing the higher fat item and ‘nudging’ consumers to the lower fat item is not necessarily driving better healthier decisions. (Though here I am not taking into consideration high cholesterol or other things linked to fat consumption.)
My point is that good nutrition and obesity are much more complicated issues then ‘fat consumption’ which is why I disagree with the fat tax.
Good post Janina
I definitely agree, Brooke – taxing fat content as such was a very blunt measure to bring about the policy aims they aspired to. I was wondering what could have worked better? A tax on calories per 100g? On sugar? On a somehow agreed-on definition of ‘fast-food’? Or are tax measures in general too difficult to use in a public health aim? In the end, a person’s diet obviously does not depend on one single aspect – some people might even eat extremely unhealthy but still exercise a lot and thus don’t fall into the ‘target population’ of people whose behavior should be changed. I guess in the end it always comes down to education.
Mmm yes I have no alternative. It is way too blunt, yes. I’m not sure how effective those ‘exercise every day’ ad campaigns work on tv either. Maybe education from the primary school years in schools? I suppose at the end of the day a person has a choice to eat and take care of their own bodies in however they see fit. :S ????
I think a huge problem with this is that the realities of economic inequities are only worsened through a taxation method like this. Cheap fast food, a major target of this tax, is heavily consumed by low-income communities, because of proximity (food deserts) and financial accessibility (healthier foods too expensive). So making cheap unhealthy food more expensive really just results in more severe marginalization of already marginalized groups. Instead, making healthier foods more accessible and affordable should be the aim. Of course, discussions of what “healthy” food is are complex and racialized. And trying to outline universal policies that don’t address cultural differences result in Western constructs of food and health being unfairly applied to communities that have different, but equally healthy, food habits and cultures.
Such good points, Cameron!!