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FoodDrinkEurope position on additional, discriminatory taxation on food & drinks

Date

06 Dec 2011

Sections

Health & Consumers
Agriculture & Food

Europe’s food and drink industry caters for increasingly evolving consumer demands by offering a wide range of nutritious, safe and enjoyable products in the context of a balanced diet and healthy lifestyle. The industry is also a highly significant contributor to national economies as a driver of growth and employment, generating 8% of EU GDP. 

Although some governments have shown interest in the introduction of additional taxes on food and drink products under the pretext of public health, in order to increase public funds as a result of the economic crisis, these plans have been abandoned due to the negative socio-economic impacts that they create; nevertheless, some national authorities remain interested in this measure. Despite this interest, there is no evidence to show that taxes, in particular discriminatory taxes, are an effective approach to tackling complex diet and lifestyle-related problems.  

Food and drink manufacturers recognise that obesity and other non-communicable diseases are important and complex societal issues, and thus, have taken responsibility to contributing to finding a solution. For example, the food and drink industry is playing its part in encouraging consumers to make informed choices around diet and health, most notably through commitments under the EU Platform for Action on Diet, Physical Activity and Health1 , (e.g. the extensive rollout of the voluntary industry-wide scheme, Guideline Daily Amounts, which provides additional, meaningful information to consumers for key nutrients2 ). 

Thus, the FoodDrinkEurope urges governments and European policy-makers to exercise great caution vis-à-vis additional, discriminatory taxation on food and drink products. 


Additional, discriminatory taxes incur negative economic impacts 

A recent OECD study based on the introduction of a discriminatory tax on sugar demonstrated that this measure would generally create a negative impact on a country’s economy as a whole3 , generating competitive disadvantage, as it is likely to discourage future inward investment. Such measures are also cumbersome, complex and expensive to manage at the national level, with diverging tax regimes resulting in further fragmentation of the Single Market, damaging the competitiveness of the EU and placing pressure on the food supply chain. Other potentially distortive impacts include trade conflicts, distortions around cross-border shopping, illegal taxation business models, regulatory arbitrage and unfair competition between food categories based on subjective criteria.

Unproven effectiveness and social impact

A World Health Organisation (WHO) review4  investigating the effectiveness of economic instruments “found no direct scientific evidence of a causal relationship between policy-related economic instruments and food consumption, including foods high in saturated fats”. 

A public health tax on food products hits low-income populations hardest. Such a tax is regressive by nature: lower socio-economic groups spend a larger share of their income on food than other income categories. It would also particularly impact consumers in countries where the household expenditure on food is very high (e.g. Romania, where household expenditure is 40% of income compared to the EU average of 16%).

According to OECD health data5 , obesity rates have increased in recent decades in Denmark despite the introduction of a discriminatory tax in Denmark on sugary products in 1922, thus showing that the tax had no impact on reducing obesity or other lifestyle-related diseases.  If such tax measures are to be proposed, their impact should be fully and scientifically assessed, to determine their actual effect. Moreover, discriminatory taxes are a blunt instrument since they penalise all consumers, irrespective of their lifestyle, state of health or the balance of their diet.

Multi-component and multi-stakeholder interventions have a key role to play

In addition to multi-component interventions6  (labelling, cooking, etc.) evidence shows that multi-stakeholder approaches are effective in tackling obesity and other lifestyle-related diseases. One important example showing promising results is the EEN – the EPODE European Network7 – a project running from 2008 to 2011 with support from the European Commission8  and private partners, including many food and drink companies. Success to date is measured by a 10-15% decrease in the prevalence of overweight children in the 10 French pilot towns.

 
2   Over a dozen large manufacturers and many major retailers are rolling out the GDA scheme on 100% of their product portfolios, with SMEs increasingly following suit. GDAs are not only the most widely used form of additional, nutrition labelling to consumers but also the most widely understood (see: FLABEL study www.flabel.org
3  OECD (2010). "Obesity and the Economics of Prevention - FIT NOT FAT"  by Franco Sassi
4  Goodman C, Anise A What is known about the effectiveness of economic instruments to reduce consumption of foods high in saturated fats and other energy-dense foods for preventing and treating obesity, WHO Regional Office for Europe (Health Evidence Network report; 2006)
5  OECD Health Data 2005 How Does Denmark Compare (See http://www.oecd.org/dataoecd/16/8/34969655.pdf)
6  WHO (2009). ‘Interventions on Diet and Physical Activity: What works’(http://www.who.int/dietphysicalactivity/whatworks/en/index.html)
7  A methodology to prevent childhood obesity. See EPODE and ENN websites at: www.epode.fr / www.epode-european-network.com
8  DG Health and Consumers (DG SANCO): http://ec.europa.eu/dgs/health_consumer/index_en.htm 
 

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