Thursday, October 6, 2011

Beating Butter: Denmark Imposes the World's First Fat Tax

Are the Danish facing an era of dry toast? On Oct. 1, consumers inDenmark saw a sudden jump in the cost of many of their favorite bread-friendly products. The average price of a half-pound package of butter increased by 2.5 krone (or 45 U.S. cents). A pound of cheese rose from 34.5 krone ($6) to 36 krone ($6.50). And don't even think about lard. In a single day, the cost of a half-pound block of pork fat skyrocketed from 12 krone ($2.15) to 16 krone ($2.85) — a 35% increase. Thanks to a new fat tax, Danes are paying more for just about anything they might want to slather on a piece of bread.
Other countries have imposed tariffs on food and drink considered unhealthy, but Denmark is taking the "fax tax" appellation literally. In the name of reducing cardiovascular disease, obesity, and diabetes, the law that went into effect on Saturday specifically targets saturated fats — the fats found most commonly in animal products like butter, cream, and meat. But few outside the government seem to think it's a good idea — or even a healthy one.(Read: "Bypassing Obesity for Alcoholism: Why Some Weight-Loss Surgeries Increase Alcohol Risk.")
The tax, the first of its kind in the world, imposes a 16 krone (roughly $3) hike per kilo of saturated fat on any food that contains more than 2.3%. Given current Danish consumption — they eat a lot of butter and sausage in Denmark — that should amount to somewhere around 82 million kilos (180 million lbs) of fat subject to the tax.
"At the political level there was a high degree of consensus for this law," says Tor Christensen, chief consultant for Denmark's Ministry of Taxation. "There was wide agreement about trying to improve the average Danish lifespan, about trying to improve the health of the Danish people." The tax was approved by nearly 90% of the Danish parliament. (See pictures of obesity rehab.)
It's not the first time that the Danish government has taken to regulating less-than-healthy foodstuffs. Sugar has long been subject to higher tariffs, though in its original incarnation, the tax was intended to raise revenue rather than improve public health. In 2004, Denmark became the first country in the world to ban transfats — the solid fats commonly used in snack foods and industrially produced baked goods. Experts say that ban has played a significant role in reducing rates of cardiovascular disease by over 30% in Denmark in the past several years.
People within the food industry aren't happy about the tax, however. "It's very frustrating how this has been implemented," says Poul Pedersen, managing director of Thise Mejeri, an organic dairy cooperative based in northern Denmark. Its 83 farmers produce 2,500 tons of butter per year — and all of them are facing diminished revenues now that they've had to raise prices. "We don't know by how much yet because it's very complicated to figure out, but of course we expect sales to go down," Pedersen says.
The tax applies to all saturated fats equally, regardless of whether they are contained in a McDonald's hamburger or a quart of milk from grassfed cows. That provision has particularly incensed the country's dairy farmers, who bristle at a categorization of their products as unhealthy, and whose recommendations, says Pedersen, were ignored by the government. "Of course we want people to eat heathfully," he says. "And no one should be eating a kilo of butter per day. But we in the dairy industry know that we produce a good and healthy product when it's eaten in moderation." (Can FoodCorps get America to eat healthfully?)
Restaurants too will feel the pain of the increasing costs. Christian Puglisi, chef of Copenhagen's highly-regarded Relae, hasn't yet raised menu prices, but knows he'll have to once he has tallied his purveyors' new invoices. The bureaucracy worries him less, though, than the tax's impact on the organic farms with which he does most of his business. "Organic is already more expensive than industrially produced [food], and the tax will just make it more so," Puglisi says. "But organic producers can't absorb the price increase the way that industrial can, so fewer people are going to be willing to buy it."
Although Danes have historically shown themselves willing to accept higher taxes that they deem beneficial to society, Puglisi doesn't believe this one fits that criteria. "The government says it wants to make people healthier, but it's talking with two tongues. It's just going to push more people to buy cheaper industrially produced products, rather than good food. It's insanely stupid."
Even medical professionals doubt the salutary effects of the law. "You can't predict the health effect of a food by looking at a single nutrient in it," says Dr. Arne Astrup, professor of human nutrition at the University of Copenhagen. "Take cheese, as an example. It's high in saturated fat, but it also contains calcium and protein that seem to change the fat's effect on the body. You would think that people who ate a lot of cheese would have higher risks of cardiovascular disease, but research has shown that's not the case." (See more on the fat tax in Denmark.)
With just under 10% of the population classified as obese, rates in Denmark are lower than Europe's 15% average, and fall significantly below the U.S.'s rate of 33.8%. Nevertheless, the average Danish lifespan of 79 years is lower than that of other Western European countries like Sweden (81.5 years), Spain (81.8 years) and France (80 years), a statistic that the departing center-right government (a center-left government took power on Oct. 3) hoped to improve with the tax.
However, Dr. Astrup says the tax ministry that proposed the measure is working with outdated data. "They based their decision on a report written in 2001," he says. "In 2001 all the available evidence suggested that we could achieve significant benefits by cutting saturated fats. But it turns out that a lot of that benefit came from cutting transfats, not saturated ones."
Many in Denmark believe the government was motivated more by financial concerns than health ones. Dr. Astrup is one of them. "This fat tax didn't evolve from proposals by the nutrition council," he says. "It was created wholly within the Tax Ministry because they were 1 billion krone ($180 million) short. They didn't do it to cut down on cardiovascular disease, they did it to close a budget gap."
If government estimates are correct (and the tax ministry itself admits that its predictions are rough), those 82 million kilos (180 million lbs) of taxable saturated fats should result in revenues of 1.3 billion krone ($233 million). Yet ministry advisor Christensen rejects the claim that the tax was motivated by the economic crisis and the government's need to generate new income. "Actually, the aim of this program of tax reform is to reduce taxes on labor, to reduce income tax," he says. "But the government has to find another source to make up the financing that it lost with those reductions. Instead of keeping income tax high, It decided to tax the unhealthy things."
Although public sentiment seems to be running against the tax, Christensen's reasoning has a fan in Sebastian Sejer, a 34-year-old graphic designer who lives outside of Copenhagen. "I know it's unpopular," Sejer says. "But I think it's a way to actually achieve something good while reducing the income tax. I work in advertising and I know that these small changes can make a difference in consumer behavior." (See more on Arizona's flab tax.)
Research on countries that have imposed cigarette and soda taxes largely indicates that he's right: increased prices do lead to at least moderately reduced consumption. But are dairy-loving Danes ready to give up their wholefat milk and cheese? Sejer's own behavior raises some doubts. He went shopping over the weekend, and ended up buying the same butter he always does. "I know it's a contradiction. But it's not going to affect what I eat."

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