'Fat tax' gets slim support from firms

Opponents of the proposed tax say it will drive up food prices, cost jobs, and have little impact on obesity

The run-up to the budget is always a jittery time for the food and drink industry, and this year is no different, with a tax on soft drinks being considered and a “fat tax” lurking in the background since last year.

Increasing taxes on food and drink is not just an Irish issue. Last week, the French senate provoked cries of “Mon Dieu!” by approving the so-called Nutella amendment, which would triple the tax on palm oil and some other vegetable oils. Palm oil is a key ingredient in Nutella, an extremely popular chocolate spread in France.

The Danish government is going in the opposite direction, scrapping its fat tax because of public criticism over increasing prices, administration costs and concerns that it is putting jobs at risk by encouraging people to cross the border to buy food.

Perhaps not surprisingly, business group Ibec says the Government should study the Danish experience carefully before it even thinks about introducing sugar or fat taxes.

Shane Dempsey, head of consumer foods at Ibec’s Food and Drink Industry Ireland, says the Danish government now has a €170 million gap in its budget for next year following the withdrawal of the fat tax.

“It was a costly mistake,” he says. “Are we destined to do the same?”

He believes the introduction of taxes on fat or sugar would result in job losses in the food sector. “I think anything that threatens to raise prices and depress demand will cost jobs. And increased unemployment is not a positive contributor to reducing obesity.” The National Dairy Council is also concerned at any suggestion that a fat tax might be introduced. It was one of the organisations that successfully campaigned against the Broadcasting Authority of Ireland’s proposed ban on cheese advertising during children’s programmes.

The council’s nutrition manager Catherine Logan says the arguments made then still stand. A tax based on saturated fat content would unfairly penalise cheese and dairy products because it would not take their high nutritional value into account.

It was “striking” that Denmark removed the tax, says Logan, and Irish policymakers should examine the reasons why.

“The tax had a huge impact on the overall economy, increasing prices, increasing company administration costs and cross-border shopping,” she says. “We really have to proceed with caution. Anything that is being implemented, we must ensure that it is evidence-based and is based on Irish data.”

It appears the emphasis has now shifted from the fat tax to a sugar tax. Ibec came out fighting last week after details emerged of an Institute of Public Health report recommending an increase in duty on fizzy drinks.

The document, prepared for the Department of Health’s action group on obesity, recommends increasing excise duty on soft drinks by 10 per cent, causing prices to rise by up to 20 cent per bottle.

Dempsey says the proposal is flawed for a number of reasons. No one has been able to show that introducing a sugar or fat tax will reduce obesity rates, he says. He has heard proponents of the tax saying that it will send a signal that these products are bad.

“Using taxation as a method of signalling? Has this signalling ever worked before?”

He believes it would be more effective to reduce Vat on fruit juices and water. He also maintains that retailers, afraid to pass on the tax to consumers because of the recession, will force manufacturers to absorb the cost. “So the tax has no chance, flawed and all as it is.”