Denmark sheds its maligned fat tax

Just over a year after implementing a much publicized surcharge on food with saturated fat, Denmark has repealed its fedtafgiften, the contentious fat tax that was believed to be the first of its kind in the world.

The fat tax, along with a proposed tax on food with high sugar content that was scheduled to come into effect in January, both fell victim to the 2013 budget deal reached Saturday after weeks of negotiations between Denmarks coalition minority government and the left-wing Enhedslisten (Red-Green Alliance ) party.

The agreement, which also scrapped a number of other levies, was described in a statement by Danish Tax Minister Holger Nielsen as what is needed in the current economic situation.

The fat tax had been criticized for affecting lower-income households. To make up for the lost revenue, the government lowered the standard deduction and raised the basic rate paid by all taxpayers, the Copenhagen Post reported.

A fact sheet released by Denmarks Tax Ministry said the fat tax had been criticized for increasing consumer prices, increasing corporate administrative costs and putting Danish jobs at risk.

The statement also blamed the tax for pushing lipo-craving Danes into cross-border shopping in neighbouring Germany and Sweden.

The end of the tax on saturated fat came just as two economists at the University of Copenhagen published a paper showing that market demand for butter, margarine and oils dropped between 10 to 20 per cent in the three months after the levy was introduced.

The authors, Jrgen Dejgrd Jensen and Sinne Smed, cautioned however that it was too early to draw firm conclusions about the taxs impact. They noted that the market changes could be caused by pre-tax hoarding.

The Danish tax, which came into effect last October, applied to food with more than 2.3 per cent saturated fat. The price of butter went up 22 per cent while margarine cost 20 per cent more.

It was believed to be the first such levy in the world and other countries considered emulating Denmark.

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Denmark sheds its maligned fat tax