Beyond fiscal policy

Often taxes are seen as ways for the state to raise money aimed at doing works of general interest such as roads, security, etc.; a way of distribution of wealth (subsidies) and in other cases encourage or discourage certain economic activities. But tax can also create or change habits and behaviors of local citizens.

Thus, for example, if a state confirms that smoking is habit harmful to public health, as it has been done, the tax on the product is increased to make it more expensive and to undermine its consumption.

In this sense in recent times we have seen the same has happened, when trying to fight against other diseases, such as obesity.

Risk factors such as hypertension, smoking, sedentary lifestyle and a diet low in fruits and vegetables and high in saturated fat, sugar and sodium / salt, are key factors in the development of chronic no contagious diseases.

While the effects caused by tobacco consumption are mostly in adults and teens to a lesser extent, the problem of overweight and obesity affects people of all ages.  While smoking is performed usually after eating, the problem of consumption of fats, sugars and salt occurs in the very act of eating.

The United Nations (UN) conclusions and recommendations’ report states the following:

“d) Taxing soft drinks and high fat, sugar and salty foods, in order to subsidize the access to fruits and vegetables and education campaigns on healthy eating”

UN considers that taxing these products would allow States to use that revenue to lower the price of healthy foods, such as fruits. It also considers granting subsidies to encourage the marketing of these foods.

So, Denmark was one of the pioneering countries in the past year to create what some call the “fat fee”, aimed to fight unhealthy eating habits.

However, today’s news is the elimination of this tax under the argument that it generated too high administrative costs.

There is a whole debate whether states should intervene so directly in the tastes and preferences of their citizens, but anyway they should analyze the economic costs involved both in health and labor if the population tends to two extreme ways: either underfed or malnourished (with overweight or obese). The productive lives of these people tend to get worse or even decrease.

While campaigns and other deterrent measures to avoid bad eating habits can be effective, what we have mentioned at the beginning (the tax on cigarettes and tobacco consumption) is a good reflection on the performance of a tax.

Hopefully the improper application of this tax in Denmark will not affect the analysis of this measure, which could trigger a number of new ways of using taxes to improve individual and social well being.

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