Shortly after the Scandinavian queendom of Denmark slapped an innovative “fat tax” on a variety of food staples, Danes began to see the slimming effects—not on their waistlines but on their wallets.
The penalty on butter, milk, cheese, pizza, meat, oil, and processed food was imposed on October 1 with an eye toward bringing down rates of cancer and cardiovascular illness. (The Danish obesity rate is actually a bit lower than those of other European nations.) But the first few weeks of data suggested the tax was driving up the retail price of food far more than anticipated.
The fat tax is set at 16 Danish kroner per kilogram (about $1.30 per pound) of saturated fat contained in or used in preparing a food. The tax is applied in cases where the saturated fat content of an item exceeds 2.3 percent. But when Denmark’s Tax Ministry engaged the weekly newspaper Sondagsavisen to conduct a check of store prices, the paper found that supermarkets had increased prices “more than needed to cover costs of the fat tax.” While the tax authority had calculated the tax would raise the price of sour cream by only 6.6 percent, for example, a spot check at one supermarket revealed that the price had increased 17.3 percent.
That may not be surprising given the uncertainties associated with a new tax, the compounding effect of increasing costs under a value-added tax system, rapid inflation in the price of dairy products on both sides of the Atlantic, and the weakening of the euro. But politicians in a nation not known for its culinary achievements have vowed to stop supermarkets from “exploiting” the tax, according to the Copenhagen Post. “Supermarkets can determine their own prices, so it is not prohibited,” an official at the Danish Consumer Council told Sondagsavisen. “But it doesn’t look good.”