Lessons to be Learned from the Danish Food Taxations, Jorgen Dejgaard Jensen

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  • Svarer til ca. 4 g/dag, eller ca. 10 pct. af det gennemsnitlige daglige indtag af fedtstoffer, jf. seneste Kostundersøgelse Hertil kommer effekter på forbrug af øvrige mejeriprodukter, kød, brød/kager, færdigretter osv
  • Hoarding effect
  • Lessons to be Learned from the Danish Food Taxations, Jorgen Dejgaard Jensen

    1. 1. European Week Against Cancer 2013Jørgen Dejgård Jensen & Sinne SmedLessons to be learnedfrom the Danish foodtaxations
    2. 2. European Week Against Cancer 2013 2Main points• General features and challenges regarding price instrumentsin nutritional policy• Taxation of sugar in beverages and confectionary inDenmark• The tale of the Danish tax on saturated fat in foods• Background and design of the tax scheme• Estimated effects of the fat tax• Abolishment of the fat tax – what went wrong?• Implications and perspectives to be drawn from the Danishexperiences so far
    3. 3. European Week Against Cancer 2013 3Some general issues concerning price instrumentsAre price instruments welfare improving?Potential health benefitsEfficiency costsMarket challengesDemand response to price changes?Transmission of tax into consumer prices?Border tradeAdministrative challengesDefinition of products eligible for taxationEnforcement and controlPolitical challengesResistance among stakeholdersRegressive effects on low-income households
    4. 4. European Week Against Cancer 2013 4Danish Taxation of sugar inbeverages and confectionary
    5. 5. European Week Against Cancer 2013 5Sugar taxation in DenmarkAll foods are subject to 25% Value Added TaxAdditional taxes on luxury goods, including:icecream, chocolate, nuts, confectionaryAdditional tax on sugar-sweetened beverages ~0.15€/liter~ 6% price premium of brands,~ 12% price premium of non-brandsAdditional taxes are topped with 25% VAT
    6. 6. European Week Against Cancer 2013 6The 2010 Danish tax reform and sugar taxation• Tax on sweets, chocolate, sugar products and ice cream was increasedby 25%• Tax on soft drinks (soda) with sugar increased by25 %, and decreased by 37% on sugar free soft drinks, i.e. changes of0.04-0.05 €/liter – or a couple of per cent price change• Consumption effects of soft drink taxo Estimated price elasticity: -1.2 (Adam & Smed, 2012)o Pre-reform tax => about 10-12% lower consumption, compared tosituation without soda taxo Reform effect => shift 2-5% of soda consumption from sugared tosugar-freeo Beware of cross-price effects! Higher price on soda => higherconsumption of fruit drinks and other non-alcoholic caloric beverages
    7. 7. European Week Against Cancer 2013 7Danish soda tax abolished from July 2013!As part of a recent policy package to enhance economic growth,the Danish tax on soda will be abolished from July 2013 –and the tax on beer will be reduced.Main arguments:Cross-border trade was harmful to business in regions close tothe Danish-German borderCross-border shopping per se generates excessive consumptionof soda and beerTax elimination/reduction reduces cross-border shoppingVAT on soda and beer remains in place
    8. 8. European Week Against Cancer 2013 8The Danish tax on saturatedfat
    9. 9. European Week Against Cancer 2013 9BackgroundIncreasing concern for lifestyle-related diseases during the lastcouple of decades – and for raising taxes to finance thewelfare stateFirst prospective estimates of Danish food tax reform in 2004(e.g. VAT-reduction on fruits and vegetables, increased taxon sugar, fat tax, tax on saturated fats etc.)Disease Prevention Commission (Forebyggelseskommissionen)established in 2008, including duty to investigate food taxreform – report delivered in 2009General tax reform, including saturated fat tax, agreed in 2010.Decided in the Danish parliament in March 2011.Saturated fat tax introduced by October 1, 2011
    10. 10. European Week Against Cancer 2013 10The Danish 2010 tax reformReduced income tax ratesIncreased tax on• Energy, environment …• Tobacco (€0.40 per 20 cigarettes)• Sugar products (€0.48 per kg added sugar)• Ice cream (€0.11 per litre)• Sugared soft drinks (€0.04 per litre)• Artificially sweetened soft drinks (-€0.04 per litre)New tax on saturated fats in foods with saturated fatcontent > 2.3g/100 g
    11. 11. European Week Against Cancer 2013 11Tax on saturated fatTax paid on the weight of saturated fat in foods with content ofsaturated fat exceeding 2.3 g/100 g: meat, dairy products,animal fats, edible oils and fats, margarine and spreadable,blended fatsDrinking milk was exempt from taxationTax rate: DKK 16.00 (€2.15) per kg saturated fat + 25% VATExample: Price of one 250 g package of butter (with saturatedfat content of 52%) increases by 2.60 DKK – an increase ofabout 20%
    12. 12. European Week Against Cancer 2013 12Administration of the fat taxTax was levied on• Commercial manufacturers of food for consumption within Denmark• Importers of foods for consumption within Denmark• Food produced for export is exempt from tax• Small producers (turnover<€7000) are exempt from the taxCalculation of taxation rate for meat• Specific documented content of saturated fat• Publicly available food composition saturated fat content data• Standard animal-specific average saturated fat content rates
    13. 13. European Week Against Cancer 2013 13Tax rates and price changes for meat due to fat taxSaturated fatcontent(g/100g)% PricechangeStandar-dizedReal Currentprice(€/500g)Unifiedtax rateDifferen-tiatedtax rateMinced beef (9-15%) 5.2 9.0-15.0 4.46 3.13 2.88Tenderloin 5.2 2.7 12.44 1.12 0.23Minced pork (9-15%) 6.5 9.0-15.0 2.68 6.52 4.80Cutlet 6.5 6.7 4.2 4.16 1.06Whole chicken 2.5 3.3 2.68 2.68 1.32Chicken breast 2.5 1.0 5.59 1.20Source: Smed (2012)
    14. 14. European Week Against Cancer 2013 14Tax rates and price changes for meat due to fat taxSaturated fatcontent(g/100g)% PricechangeStandar-dizedReal Currentprice(€/500g)Unifiedtax rateDifferen-tiatedtax rateMinced beef (9-15%) 5.2 9.0-15.0 4.46 3.13 7.53Tenderloin 5.2 2.7 12.44 1.12 0.58Minced pork (9-15%) 6.5 9.0-15.0 2.68 6.52 12.53Cutlet 6.5 6.7 4.2 4.16 2.62Whole chicken 2.5 3.3 2.68 2.68 3.53Chicken breast 2.5 1.0 5.59 1.20 0.48Source: Smed (2012)
    15. 15. European Week Against Cancer 2013 15Preliminary effect estimatesFat tax was implemented by October 1, 2011GfK Household ConsumerTracking Scandinavia weeklyhousehold panel (cohort) data, january 2009 - december2011Fats and oils: butter, mixed butter, margarine and vegetableoilsEconometric analysis:Compare purchased quantities and prices for September,October, November, December 2011 with correspondingmonths from the previous years
    16. 16. European Week Against Cancer 2013 16Effect of DK fat tax on consumption of fats and oils -preliminary estimates
    17. 17. European Week Against Cancer 2013 17Hoarding effects prior to the introduction of the taxOct. 1, 2011Fat products’ share of total purchased food quantities per week, 2009-20112009 | 2010 | 2011
    18. 18. European Week Against Cancer 2013 18The fat tax has given food suppliers an opportunity fornew price structuresChange in fat product prices after tax
    19. 19. European Week Against Cancer 2013 19Abolition of the fat tax – what went wrong?In the agreement upon the Fiscal Budget 2013, abolition of thefat tax from January 1, 2013, was decided. The tax got 15monthsThe loss of revenue was compensated by an increase in theincome tax rateWhat happened?
    20. 20. European Week Against Cancer 2013 20Political processes surrounding the fat taxPrimary objective at introduction: Reduceincome tax and upward pressure on wagesDesigned by Ministry of TaxLimited involvement of stakeholders,authorities, expertsWeaknesses in design and low commitmentFew advocates to stand up against critiqueChange of cabinet, Sept 2011Primary objective at abolition: Protect jobs”… Heavy administrativeburdens…”” … Consumers shop across theborder…””… Loss of jobs…””… Tax harms the poor…””… Tax doesn’t improve health…”
    21. 21. European Week Against Cancer 2013 21Political resistanceSURVEY: ”A majority of Danes reject higher food taxes””Do you agree or disagree with the following statement?”Source: Interresearch for Danish Grocers’ Association (DSK), March 2012 / Børsen, April 20, 2012
    22. 22. European Week Against Cancer 2013 22Implications and perspectivesto be drawn from the Danishexperiences so far
    23. 23. European Week Against Cancer 2013 23Some perspectives on the Danish food taxesEffects of the Danish taxation of sugar-sweetened beveragesand other sugar products have not been evaluated, but theyare expected to have a reducing effect on consumptionThe Danish fat tax generated revenues for the government(about 1.2 billion DKK in tax revenues is expected from theDanish fat tax in 2012)The fat tax seems to have affected the consumption of fatswhile in placeAdministrative feasibility of the tax – for authorities as well asfor the industries - was found to be a critical issueThe tax opened a ‘window of opportunity’ for retailers torestructure their price setting, product sizing, marketing
    24. 24. European Week Against Cancer 2013 24Lessons learned about health-motivated food taxschemesIt is important that… a health-motivated tax is transparent… a tax scheme is backed by experts and professionals… potential health benefits can be understood andrecognized by the consumers and other stakeholders… administrative burdens to the industries are kept at alevel that can be coped with.… economic and political challenges related to thescheme are dealt with
    25. 25. European Week Against Cancer 2013 25References/contact info Contact: ss@foi.ku.dk and jorgen@foi.ku.dk Simulation studies on food taxation Smed S., J.D. Jensen and S. Denver (2007): Socio-economic characteristics and the effect oftaxation as a health policy instrument Food Policy. Food Policy, 32(5-6):624-639 Jensen, J.D., and S. Smed (2007): Cost-effective design of economic instruments in nutritionpolicy. International Journal of Behavioral Nutrition and Physical Activity 2007, 4(10) Danish academy of technical sciences (2007): Economic nutrition policy tools - useful in thechallenge to combat obesity and poor nutrition? Downloadable fromhttp://www.atv.dk/uploads/1227087410economicnutrition.pdf Holm A.L., Laursen M-B., Koch M., Jensen J.D. & Diderichsen F (2013) The health benefits ofselective taxation as an economic instrument in relation to ischaemic heart disease and nutrition-related cancers, Public Health Nutrition, doi: 10.1017/S1368980013000153 On the Danish fat tax Smed S., A. Robertson (2012): Are taxes on fatty foods having the desired health impact? BMJeditorial, BMJ 2012;345:e6885 Smed S. (2012): Financial penalties on foods - The fat tax in Denmark. Nutrition Bulletin. Vol. 37,no 2. pp. 142-147 Jensen J.D and S. Smed (2012): The Danish tax on saturated fat. Short run effects onconsumption and consumer prices of fats. FOI Working paper, no.14/2012Downloadable from www.foi.dk
    26. 26. European Week Against Cancer 2013 26jorgen@ifro.ku.dk
    27. 27. European Week Against Cancer 2013 27Regression: Households’ annual fat tax paymentSources:Danish Ministry of Tax Affairs,Statistics Denmark
    28. 28. European Week Against Cancer 2013 28Households’ fat tax payment, relative to consumption

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