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Fat Tax Didn't Work in Denmark, Won't Work in B.C.

Posted: 02/26/2013 1:42 pm

Whether by the B.C. independent business tax panel, the B.C. Healthy Living Alliance or a Kamloops city councillor, the idea of a fat or sugar tax continues to pop up like the pesky mole in that old midway game. Unfortunately, it's taxpayers -- and the provincial economy -- that would get whacked by such a tax.

Supporters of such a flawed taxation policy should look to Denmark's experience for a textbook example of why it doesn't work.

In October 2011, Denmark was the one of the first countries in the world to bring in a fat tax, and the first to abolish it 13 months later. No wonder: it was a fiscal disaster, driving hundreds of thousands of Danes across the German border for cheaper groceries and costing hundreds of jobs, according to Jens Klarskov, CEO of Dansk Erhverv (the Danish Chamber of Commerce).

It got so bad during Denmark's fat tax era that German stores sent flyers to Danish homes, translated into Danish, bragging: "No fat tax here!"

The ads worked; more Danes began to shop in Germany.  The Danish Chamber released a poll showing that before the fat tax, one in three Danes shopped in Germany. During the fat tax era, that number grew to one out of every two.

When asked about why they shopped outside Denmark, one in three named the fat tax as the primary reason. Long known as the place where Danes shop for booze, cigarettes and sweets, Germany, thanks to the fat tax, large discounts and professional marketing, became a place where Danes also shopped for food. 

Sound familiar? Lower Mainlanders crossed the U.S. border 15.4 million times into Whatcom County last year in search of cheaper gas, cheaper flights, cheaper booze, cheaper clothing, cheaper consumer goods, cheaper milk and cheaper cheese. That's the highest cross-border shopping total since 1997.

With money stretched thin due to a high cost of living and heavy tax load, British Columbians are already pouring south to stretch their paycheques further.

As the Fraser Institute's Mark Milke recently pointed out, Canadian customs tariffs already add $3.6 billion in consumer costs to nearly everything we buy here. Throwing on another tax would just further grow that price gap.

Imagine a tax on fat or sugar or pop in B.C., and U.S. grocery stores ripping a page out of the German advertising playbook: "No fat tax here!"

For the two-thirds of British Columbians who live in the six regional districts along the U.S. border, such savings would be impossible to ignore. Add to that the thousands of people who live near the Alberta border and the economic fallout for B.C. could be catastrophic.

The argument for fat and sugar taxes revolves around higher prices limiting consumption and thus curbing obesity. Fortunately, many B.C. health experts don't buy into that myth.

"Research actually shows little correlation between individual behaviours and body weight: many who seldom consume such foods are overweight while many who do, are not," said Dr. Paul Martiquet, an adjunct professor at the UBC School of Medicine and the Medical Health Officer for Powell River, Sunshine Coast, Sea to Sky, Bella Bella and Bella Coola.

Indeed, Klarskov, who visited Canada on a recent speaking and media tour to share the Danish fat tax experience, noted that Denmark's health experts estimated only a five-and-a-half day increase to Danish life expectancy, once the fat tax was in place for ten full years. "This is [like] shooting rabbits with nuclear weapons," Klarskov quipped.

B.C. bureaucrats have noted, in documents obtained by the CTF through a Freedom of Information Act request, that a fat tax is "purely a revenue measure."

Klarskov and the Danish Chamber of Commerce estimate Denmark lost 1,300 jobs as a direct result of their fat tax social experiment. In B.C., it could be worse.

Fat and sugar tax supporters would do well to read up on the Danish experience before willfully causing harm to the B.C. economy for virtually no health return.

 

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