The document summarizes Denmark's experience with a tax on saturated fat from 2011 to 2012. Preliminary analysis found the fat tax reduced saturated fat consumption by around 6% and generated about €160 million annually for the government. However, the tax was abolished in 2012 due to concerns about unintended consequences like substitution to cheaper unhealthy foods. While the tax had short term impacts, more research is still needed to fully assess the costs and health benefits of using economic instruments for nutrition policy.

1. Price policies to promote healthy
nutrition
Denmark’s experience with the tax on saturated fat
Sinne Smed
University of Copenhagen
Department of Food and Resource Economics
Europe day of the 8th Global conference on health Promotion
Helsinki, Findland

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, increased
taxation 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 parliament
March 17th, 2011
• The abolition of the fat tax was unanimously agreed upon by the Danish
parliament November 10th, 2012 together with an abolishment of an
extension of the sugar tax.
• Taxes on soft-drinks are decided to be removed by 2014 together with a
decrease in the tax on beer

3. Structure of the fat tax
• Tax paid on the weight of saturated fat in foods and on
saturated fat used for the production of foods when the
content 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 fat
content of 52g/100g) increases by €0.33
– an increase of about 20%
– Price of a 250 g package of chips (with saturated fat
content of 13.6g/100g) increases by €0.09
– an increase of about 5.7%
Non trivial
Price changes!

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 same
basket available at an extended cost less money to buy
unhealthy 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. Examples of adverse side effects
• Prospective studies based on estimated price
elasticities, taxation of single nutrient
-25
-20
-15
-10
-5
0
5
10
Tax on saturated
fats
Subsidy on fibre Tax on sugar
% change
Saturated fats
Sugar
Fibre

6. Examples of how to control them
• Prospective studies, based on estimated price
elasticities, taxation of multiple nutrients
-20
-15
-10
-5
0
5
10
15
20
Revenue neutral scenario, tax on
saturated fat, subsidy on fibers
Revenue neutral scenario, tax on
saturated fat and sugar, subsidy on
fibers
% change
Saturated fats
Sugar
Fibre

7. Effect estimates of the Danish fat tax
• GfK Household Consumer Tracking Scandinavia weekly
household panel (cohort) data
• PRELIMINARY effects on total consumption of saturated
fat, energy and carbohydrates (July 2009 – July 2012)
• Econometric analysis of the market for fats and oils:
butter, mixed butter, margarine and vegetable oils (January
2008 – July 2012)
• Consumption effects
• Substitution effects between products and stores
• Price - setting mechanisms

8. Consumption of saturated fat
(Preliminary - please do not quote!!!)
0
50
100
150
200
250
300
350
400
450
500g/pers
Orginal data Model with season Model without season

9. Consumption of saturated fat
(Preliminary - Please do not quote!!!)
0
50
100
150
200
250
300
350
400
450
500g/pers
Orginal data Model with season Model without season
Hoarding, increase by 34%

10. Consumption of saturated fat
(Preliminary - Please do not quote!!!)
0
50
100
150
200
250
300
350
400
450
500g/pers
Orginal data Model with season Model without season
tax, decrease by 5.9%

11. Consumption of saturated fat
(Preliminary - Please do not quote!!!)
0
50
100
150
200
250
300
350
400g/pers
all
soc1
soc2
soc3
Hoarding,
increase by 30, 30 and 36%

12. Consumption of saturated fat
0
50
100
150
200
250
300
350
400g/pers
all
soc1
soc2
soc3
Decrease by 7.9%, 6.0 and 6.1%

13. Hoarding effects prior to the introduction
of the fat tax (fats and oils)
Fat tax
g fats per household per week, 2008- July 2012
2008 | 2009 | 2010 | 2011 | 20120
100
200
300
400
500
600
700
800
900
1000
fats
butter
margarine

14. Effect of fat tax on consumption of
fats and oils
-0.80
-0.70
-0.60
-0.50
-0.40
-0.30
-0.20
-0.10
0.00
Butter Mixed butter Margarine Oils
kg/head/year

15. The fat tax is an opportunity for new
price structures
Change in fat product prices after tax
-3
-1
1
3
5
7
9
11
13
Butter Butter
blend
Margarine Oils
DKK/kg
Theoretical
Supermarkets

16. The fat tax is an opportunity for new
price structures
Change in fat product prices after tax
-3
-1
1
3
5
7
9
11
13
Butter Butter
blend
Margarine Oils
DKK/kg
Theoretical
Supermarkets
Discount stores

17. Implications
• The fat tax generated revenues for the government about €160
million annually equivalent to €72 annually per household
• The fat tax seems to have affected the consumption of oils and
fats with a 10 – 12% decrease – at least in the short term
• VERY PRELIMINARY data analysis suggests a decrease in
saturated fat consumption of 6%, no significant differences
between social classes
• The tax opened a ‘window of opportunity’ for retailers to
restructure their price setting, product sizing and marketing
(fats and oils)
• Substitution from supermarkets to discount stores
(fats and oils)

18. Possibilities of a revival of the
Danish 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 the
consumers, lost revenue due to increased border trade
– Benefits in term of saved health care cost and increased well being for
consumers due to better health condition
• Inclusion of all partners, nutrition and consumer experts, retail
sector, 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. 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 of
taxation 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 nutrition
policy. International Journal of Behavioral Nutrition and Physical Activity 2007, 4(10)
 Danish academy of technical sciences (2007): Economic nutrition policy tools - useful in the
challenge to combat obesity and poor nutrition? Downloadable from
http://www.atv.dk/uploads/1227087410economicnutrition.pdf
 Holm A.L., Laursen M-B., Koch M., Jensen J.D. & Diderichsen F (2013) The health benefits of
selective 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? BMJ
editorial, 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 on
consumption and consumer prices of fats. FOI Working paper, no.14/2012
Downloadable from www.foi.dk, forth-comming in Food Policy