I have a new IEA publication out today: The Proof of the Pudding: Denmark's Fat Tax Fiasco (free download). Lobbyists for sin taxes on food and drink don't like to talk about what happened in Denmark. Rather like communism, their policies only work in theory and it is considered unfair to point to countries where they have been tried and failed. Nevertheless, the best natural experiment to date took place in Denmark. It was an economic and political failure for reasons that could easily have been foreseen. The Proof and the Pudding looks at exactly what happened.
I've written a blog post about this for the IEA. This is a taster...
Despite the unambiguous results of this natural experiment, public health campaigners in the UK continue to lobby for similar policies. Just four days after the Danes announced the abolition of the fat tax, the National Heart Forum called on the government to introduce a tax on foods that are high in salt, sugar and fat. Two months later, a coalition of 61 organisations demanded a 20p per litre tax on sugar-sweetened beverages (or - as they call them - ‘mini-health timebombs’). Most recently, the Academy of Medical Royal Colleges called for a 20 per cent tax on the same soft drinks. The Academy sheepishly mentioned that Denmark had experimented with ‘a slightly broader plan’, but did not acknowledge that the experiment had ended, let alone explain why.
The ‘evidence-based policy’ of these groups takes no account of what actually happens when their policies are tested in the real world. Concerns about job losses and the cost of living seem to be of no interest to them. Perhaps this is because they do not have to stand for re-election. For politicians, however, Denmark’s fat tax fiasco is a valuable reminder of how economically inefficient, regressive and unpopular such policies are. Denmark has since announced that it will abolish its hated fizzy drinks tax and is cutting beer duty for the same reason it dropped the fat tax - to ‘promote growth and employment’. Politicians should take heed of this real world evidence rather than listen to single issue campaigners and their optimistic computer models.
Please do go read the rest here. The full report is here.