Denmark introduced the worlds first 'Fat Tax' just over a year ago. It was covered in this blog and got one of the highest number of hits of any post to date.
Now Denmark is scrapping the tax. They say its because it has cost jobs, caused people to go into Germany to shop and inflated prices.
Well taxes do raise price! That's the point. This is a disappointing move as it represents a victory political expediency over economic policy.
It would be nice to find out how much the tax changed behaviour, especially in areas a long way from the German border.
If there is an important lesson to learn it is that a country acting alone can disadvantage itself. This has often be said of acting on carbon emissions and pollution. If you impose higher costs on domestic firms in a market with few barriers to international movement then the result maybe that firms move. So perhaps the answer is a European Fat Tax; good luck convincing David Cameron on that one.
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In theory the well intentioned "fat-tax" should both have contributed to a healthier population but also reduced spending on health problem derived from heavy consumption of fatty foods as well as a reduction in wasted productivity from health conditions related to this consumption.
ReplyDeleteIn practice however, the Danish government succeeded in creating an unpopular tax, both with consumers and with big business. Whilst aimed at the fast food industry, the tax also affected staple food items like butter, milk and meat which are naturally high in fat.
As is highlighted in the article this meant that many consumers living near the German border were simply travelling over the border to buy food at more affordable prices. It's evident from this that in a political and economic situation such as the EU where there is a single currency and free movement between countries that co-operation between countries is key to these sorts of policies being a success. Of course, those not near the border can't simply take a trip across to Germany for better prices, these people were most likely the most significantly affected as they were either forced to buy less fast food items or fore-go the purchase of other goods.
It might be more beneficial and more significantly arouse less opposition and hurt the economy less to invest more in educating people about eating healthily. This gives people the knowledge to allow them to choose how they treat themselves when it comes to eating fatty food instead of simply putting up barriers to try and force them to stop.
While the fat-tax is a good idea in principle, it is simply to idealistic to be successfully implemented and I would be impressed if a country could pull such a task off.
James Woodcock
A Fat Tax is a good idea in principle, because it would reduce the supply of fatty food and in turn increase the price of fatty food but I think it would be a bad idea in practice because many of the consumers of fatty food are actually low income people which is probably why fast food shops dominate the high streets in really urban areas. A Fat Tax could end up becoming a tax on the poor. What might be a good idea is to have a lower VAT rate on healthy foods or even exempt them from VAT which would boost supply of these foods which would cut the prices for these foods. But due to the huge size of the deficit, it might be a bad idea.
ReplyDeleteThis tax was clearly unpopular amongst consumers and businesses alike. The fact that there was an increase in price does not mean that the tastes and peferences of the DAnes has changed and as a result of this they were willing to travel to fullfil their desire for fatty foods but at a cheaper price. This was able to happen as Germany was not implementing a similar tax and the free movement between European countries made it easy for the Danes to continue with their unhealthy eating. This has meant this tax has had a negative effect on the Danidh economy as less people are buying in Denmark and price levels were inflated.
ReplyDeleteSo although the idea was a good one in theory in practice it was not at all productive with the lack of similar ideas from other european countries and the ease of travel in the EU the main reasons for the taxes failure.
David Harrison-Fisher
Umar Ahmed
ReplyDeleteThe “fat tax” was always going to be an unpopular tax due to the addictiveness and convenience of fast food in general, but the reason this tax didn't have the intended results in Belgium were that it was easy for people near to the border to Germany to buy fast food. So if the whole of the EU imposed a fat tax it would have had the intended effects as people won’t be able to find any places with cheap fast food anymore causing people to reduce the amount of fast food they bought, reducing negative externalities caused by fast foods. This would then reduce costs for our nhs so less money is wasted by our government as well as our government receiving extra “fat tax” revenue, causing a reduction in our budget deficit. This will also increase life expectancy in the EU as people are likelier to eat healthy cheaper foods.
However I believe the first step against tackling these negative externalities should be educating the country about the health implications of fast food and monitoring what the fast food restaurants are selling to make sure the food sold isn't that unhealthy.
Chanel Sangster
ReplyDeleteThe fat tax seemed like a good quick fix in theory as increasing the price should decrease the price according to the law of demand but fatty foods such as fast foods and donuts are fairly addictive that people would look for cheaper opportunities immediately. Those who could travel to germany took advantage of this. Adding a tax should in theory internalise the negative externalities of consuming fat foods and making a healthy population but it could not be feasible in a nation where travel is fairly easy and businesses were also the ones loosing out as those who couldn't travel to germany significantly lowered their consumption. It could be said that the fatty foods were fairly elastic goods at this point and the tax just wasn't helping the situation.
I would like to disagree with Renie's point, stating that the people this would affect most greatly would be "low income people, which is probably why fast food shops dominate the high streets in really urban areas." I think that the major reason people choose to buy fast food is due to convenience. Of course price is an issue, but I would say that McDonalds is a poor substitute for a more expensive restaurant. E.g. you go to McDonalds if you are out in town and hungry, it is easy to get, and a similar price to making your own packed lunch, where as a restaurant is used for taking someone on a date etc.
ReplyDeleteI think the tax seemed wrong for the beginning, considering only foods containing more than 2.3 per cent saturated fat were subject to the surcharge, which included dairy produce. My first issue is that it did nothing to prevent high sugar foods, such as most sweets. This is probably the main type of food which is leading to obesity, especially in the younger generations. To just base the tax on fats seemed wrong. Also, to include dairy produce is an issue in my opinion. This would mean the average household, even one which tries to be healthy would be impacted. Both the prices of milk and butter would go up, which are part of a staple diet in almost anyone's home. Making people pay more for these, such as full fat milk which is recommended for children seems wrong.
I think it would have been a good idea to change the tax in a way that would target a more refined group. For example "Senators in France last week called for a tax on foods containing palm oil." I think this is a very good idea as palm oil is often added to once healthy products such as peanut butter. This could cause firms to stop adding palm oil to peanut butter, and improving general health for the people. Taxing sugar would also be good as it would help reduce the amount of possible sugar being added into goods.
Another good idea would be to reduce demand by changing taste and preferences of the people, starting advertising campaigns against unhealthy foods, and promoting healthier options.
Finally, it would be very difficult to properly implement this tax when it is so easy for people to move across the border and buy cheaper goods. The decision would have to be made by multiple countries in order to have a real effect. The effect of taxing goods meant that the substitute good for fatty foods in Denmark was fatty foods in Germany, rather than the hope of people turning to healthier options.
I think that educating the country as to what is healthier for them would be a much more efficient way of dealing with the issue. whilst introducing the 'fat tax' had the right motifs behind it in principle it wasn't going to work as fast food is convenient and cheap for many low income households. what needs to be done is to make the healthier foods more accesible and convenient for consumers and this should start to reduce demand for fattier foods. Over time this should lead to a decrease in obesity in some cases and overall make the country more healthy.
ReplyDeleteFor a tax on unhealthy foods to be successful there needs to be equal taxes across the EU as travel is easy and it is easy for consumers to get this food without the tax from neigbouring nations.
Sascha Haigh
As I am German I know, that Germany thought quiet a time about introducing such a fat tax. I think if there would have been a fat tax existing in Germany the situation the tax would have been working in would have made it hard for the Danish people to escape from the tax.
ReplyDeleteBut the actual point I wanted to talk about is the actual sense of the tax and it´s impact on economics.
The part of the reason for the introduction of the tax was definitely the factor health. the health of the working popularity is an important aspect for the marginal output per worker employed, the costs per worker employed and the diminishing returns and the worthiness of specification of a firm.
For example a fat worker in a car factory can´t produce as much as his colleague can, as he he is lass mobile and it takes longer for him to do what he is supposed to do. This reduces the marginal output of the firm if they measure the ability to work per worker asan average and therefor make it possible to define the marginal output. That means if there are two firms, one employing thin and mobile person and the other fat people on a the same and fixed area of production and with the workers having the same level of skill and knowledge about their job, ceteris paribus, the firm with the thin people will have a higher marginal output at the same amount of workers employed, therefor the diminishing returns may start later and the marginal output will stay positive longer. And therefor the firm with the thin people will in the end produce more than the firm with the fat people.
This is also affected by the marginal cost. Fat people tend to be less healthy and therefor need more or better health insurance, the firm might have to pay and therefor they cost more money to employ.
And therefor fat taxes would have made sense if they would have worked...
Lorenz Essing