Price policies to promote healthynutritionDenmark’s experience with the tax on saturated fatSinne SmedUniversity of Copenh...
History of the Danish fat tax• First prospective estimates of Danish food tax reform in 2004• Disease Prevention Commissio...
Structure of the fat tax• Tax paid on the weight of saturated fat in foods and onsaturated fat used for the production of ...
How do taxes work?• Administrative and political challenges• Market challenges• Price setting structure in retail• Income ...
Examples of adverse side effects• Prospective studies based on estimated priceelasticities, taxation of single nutrient-25...
Examples of how to control them• Prospective studies, based on estimated priceelasticities, taxation of multiple nutrients...
Effect estimates of the Danish fat tax• GfK Household Consumer Tracking Scandinavia weeklyhousehold panel (cohort) data• P...
Consumption of saturated fat(Preliminary - please do not quote!!!)050100150200250300350400450500g/persOrginal data Model w...
Consumption of saturated fat(Preliminary - Please do not quote!!!)050100150200250300350400450500g/persOrginal data Model w...
Consumption of saturated fat(Preliminary - Please do not quote!!!)050100150200250300350400450500g/persOrginal data Model w...
Consumption of saturated fat(Preliminary - Please do not quote!!!)050100150200250300350400g/persallsoc1soc2soc3Hoarding,in...
Consumption of saturated fat050100150200250300350400g/persallsoc1soc2soc3Decrease by 7.9%, 6.0 and 6.1%
Hoarding effects prior to the introductionof the fat tax (fats and oils)Fat taxg fats per household per week, 2008- July 2...
Effect of fat tax on consumption offats and oils-0.80-0.70-0.60-0.50-0.40-0.30-0.20-0.100.00Butter Mixed butter Margarine ...
The fat tax is an opportunity for newprice structuresChange in fat product prices after tax-3-1135791113Butter Butterblend...
The fat tax is an opportunity for newprice structuresChange in fat product prices after tax-3-1135791113Butter Butterblend...
Implications• The fat tax generated revenues for the government about €160million annually equivalent to €72 annually per ...
Possibilities of a revival of theDanish fat tax?• We still lack to access the full dietary effects of the fat tax• A full ...
Literature/contact Email: ss@ifro.ku.dk and jorgen@ifro.ku.dk Simulation studies on food taxation Smed S., J.D. Jensen ...
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Sinne Smed, University of Copenhagen, Denmark

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Sinne Smed, University of Copenhagen, Denmark

  1. 1. Price policies to promote healthynutritionDenmark’s experience with the tax on saturated fatSinne SmedUniversity of CopenhagenDepartment of Food and Resource EconomicsEurope day of the 8th Global conference on health PromotionHelsinki, Findland
  2. 2. History of the Danish fat tax• First prospective estimates of Danish food tax reform in 2004• Disease Prevention Commission established in 2008• General tax reform,– Decrease taxation on income financed by, among other things, increasedtaxation on energy and unhealthy foods as tobacco, sugar-products, ice-cream, sugar sweetened soft-drinks• The fat tax was adopted almost unanimously by the Danish parliamentMarch 17th, 2011• The abolition of the fat tax was unanimously agreed upon by the Danishparliament November 10th, 2012 together with an abolishment of anextension of the sugar tax.• Taxes on soft-drinks are decided to be removed by 2014 together with adecrease in the tax on beer
  3. 3. Structure of the fat tax• Tax paid on the weight of saturated fat in foods and onsaturated fat used for the production of foods when thecontent of saturated fat exceeds 2.3 g/100 g• Tax rate: DKK 16.00 (€2.15) per kg saturated fat + 25% VAT– Price of a 250 g package of butter (with saturated fatcontent of 52g/100g) increases by €0.33– an increase of about 20%– Price of a 250 g package of chips (with saturated fatcontent of 13.6g/100g) increases by €0.09– an increase of about 5.7%Non trivialPrice changes!
  4. 4. How do taxes work?• Administrative and political challenges• Market challenges• Price setting structure in retail• Income effect• Lack of resources or willingness to change behaviour samebasket available at an extended cost less money to buyunhealthy foods AND healthy foods• Substitution effects• What kind of substitutes are available?– Healthier type?– Cheaper brand or cheaper store?– Across border trade?Unwanted unexpected adverse health effects
  5. 5. Examples of adverse side effects• Prospective studies based on estimated priceelasticities, taxation of single nutrient-25-20-15-10-50510Tax on saturatedfatsSubsidy on fibre Tax on sugar% changeSaturated fatsSugarFibre
  6. 6. Examples of how to control them• Prospective studies, based on estimated priceelasticities, taxation of multiple nutrients-20-15-10-505101520Revenue neutral scenario, tax onsaturated fat, subsidy on fibersRevenue neutral scenario, tax onsaturated fat and sugar, subsidy onfibers% changeSaturated fatsSugarFibre
  7. 7. Effect estimates of the Danish fat tax• GfK Household Consumer Tracking Scandinavia weeklyhousehold panel (cohort) data• PRELIMINARY effects on total consumption of saturatedfat, energy and carbohydrates (July 2009 – July 2012)• Econometric analysis of the market for fats and oils:butter, mixed butter, margarine and vegetable oils (January2008 – July 2012)• Consumption effects• Substitution effects between products and stores• Price - setting mechanisms
  8. 8. Consumption of saturated fat(Preliminary - please do not quote!!!)050100150200250300350400450500g/persOrginal data Model with season Model without season
  9. 9. Consumption of saturated fat(Preliminary - Please do not quote!!!)050100150200250300350400450500g/persOrginal data Model with season Model without seasonHoarding, increase by 34%
  10. 10. Consumption of saturated fat(Preliminary - Please do not quote!!!)050100150200250300350400450500g/persOrginal data Model with season Model without seasontax, decrease by 5.9%
  11. 11. Consumption of saturated fat(Preliminary - Please do not quote!!!)050100150200250300350400g/persallsoc1soc2soc3Hoarding,increase by 30, 30 and 36%
  12. 12. Consumption of saturated fat050100150200250300350400g/persallsoc1soc2soc3Decrease by 7.9%, 6.0 and 6.1%
  13. 13. Hoarding effects prior to the introductionof the fat tax (fats and oils)Fat taxg fats per household per week, 2008- July 20122008 | 2009 | 2010 | 2011 | 201201002003004005006007008009001000fatsbuttermargarine
  14. 14. Effect of fat tax on consumption offats and oils-0.80-0.70-0.60-0.50-0.40-0.30-0.20-0.100.00Butter Mixed butter Margarine Oilskg/head/year
  15. 15. The fat tax is an opportunity for newprice structuresChange in fat product prices after tax-3-1135791113Butter ButterblendMargarine OilsDKK/kgTheoreticalSupermarkets
  16. 16. The fat tax is an opportunity for newprice structuresChange in fat product prices after tax-3-1135791113Butter ButterblendMargarine OilsDKK/kgTheoreticalSupermarketsDiscount stores
  17. 17. Implications• The fat tax generated revenues for the government about €160million annually equivalent to €72 annually per household• The fat tax seems to have affected the consumption of oils andfats with a 10 – 12% decrease – at least in the short term• VERY PRELIMINARY data analysis suggests a decrease insaturated fat consumption of 6%, no significant differencesbetween social classes• The tax opened a ‘window of opportunity’ for retailers torestructure their price setting, product sizing and marketing(fats and oils)• Substitution from supermarkets to discount stores(fats and oils)
  18. 18. Possibilities of a revival of theDanish fat tax?• We still lack to access the full dietary effects of the fat tax• A full assessment includes a full cost/benefit approach– Costs in terms of: administration cost, extra expenses for theconsumers, lost revenue due to increased border trade– Benefits in term of saved health care cost and increased well being forconsumers due to better health condition• Inclusion of all partners, nutrition and consumer experts, retailsector, industry, administrative staff in ministries etc.• Joint European initiative, take account of differences in:– Price elasticities and need of dietary regulation– Current price levels, VAT and administrative infrastructure– Industry structure and price transmission mechanisms
  19. 19. Literature/contact Email: ss@ifro.ku.dk and jorgen@ifro.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, forth-comming in Food Policy

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