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Could the EU implement a Europe-wide fat tax?

By Caroline Scott-Thomas , 26-Sep-2012

European policymakers may be considering a Europe-wide fat tax in an effort to combat obesity – although such a move would be complicated and subject to considerable debate, according to Alberto Alemanno, associate professor of law at HEC Paris.

Speaking at a conference at HEC Paris last week called “Regulating Lifestyle Risks in Europe,” Alemanno said that despite Denmark’s recent backtracking on its less than year-old tax on foods high in saturated fat, “The big question is whether the EU is going toward a fat tax.”

The EU says no, but Alemanno claims: “The reality is a bit more complicated.”

So-called ‘fat taxes’, referring to taxes on fattening foods, are also called Pigouvian taxes, after Arthur Pigou, an English economist who, back in the early 20th century, first proposed the idea of taxing products whose price does not reflect their true cost to society.

“Historically, we have been taxing a lot of products,” Alemanno said, including alcohol, tobacco and, more recently, greenhouse gas emissions.

“There is ambiguity about this debate in Europe…The debate revolves around three main arguments,” he said – whether such taxes are effective, whether they are regressive, and how they are designed.

However, these arguments were absent from the reasons Denmark gave for rescinding its fat tax, instead saying the measure was affecting local businesses, as Danes were crossing the border into Germany to stock up on fatty foods – a claim that Alemanno views with some scepticism.

“Is it really because of the fat tax?” he asked. “…Alcohol is cheaper in Germany.”

Along with Ignacio Carreño of the FratiniVergano in Brussels, Alemanno has just released a legal and policy analysis of the notion of fat taxes under EU and WTO law, which suggests that a lack of political will and creativity have been the main roadblocks to developing a credible EU obesity prevention strategy, part of which could involve fat taxes.

“If several Member States adopt such taxes, the EU may consider stepping in so as to adopt an EU-wide fat tax,” the paper reads. “…There are signs that the EU is eager to play such a role. Indeed, the Union has already shown political will to embark on this path by adopting a regulation on nutrition and health claims which forces food companies to substantiate their labelling claims, as well as a regulation on the provision of food information, one of whose main goals is to provide help to consumers in making ‘healthy’ choices.

“Yet, given the significant differences in obesity prevalence among the EU Member States, to establish a EU-wise fat tax would also face the challenge to determine a viable and effective tax rate valid for the whole European territory.”

In addition, unanimity among member states may also prove a barrier to EU-wide legislation.

In his presentation to delegates at the HEC Paris, Alemanno said: “As with much public health policy, we have to clarify what we want to achieve… [A tax] might be less effective on obese people so might be more of a prevention tool.”

And while people on the lowest incomes may spend the largest proportion of their income on food, “being sensitive to price might mean that these really are effective in their actions,” he said.

Taxes on unhealthy foods and beverages in Europe may also have more success if the resulting revenues were ploughed back into health and wellness initiatives, he said, pointing out that among several in Europe, only the Hungarian scheme – broader than the Danish approach, in that it focuses on salt, sugar and caffeine as well as fat – enforces paying revenue raised back into anti-obesity programmes.

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