How Denmark led the way on 'sin taxes'

The World Health Organisation released a report last month calling for governments around the world to introduce a tax on sugary drinks, and referred in glowing terms to Denmark's fat tax.

The report said the levy “proved to be efficient in reducing the intake of saturated fat as well as in improving other dietary measures and reducing mortality” from non-communicable diseases.

The tax saved lives? A big claim to make for a measure that lasted barely a year – from October 2011 to January 2013.

To be fair, the report goes on to list the design flaws and failings in the tax, and uses the Danish experience to learn how such measures can be designed better – and presumably avoid being repealed soon after they are introduced.

But the report backed itself into a corner by repeatedly claiming that there was “increasingly clear evidence” that taxing sugary drinks leads to better health.

There are so few real-world examples that they ended up discussing a Danish tax that didn't even target sugary drinks.

Some of the other 10 countries included in the WHO's reckoning appear equally eccentric – Thailand taxes sugary drinks at a lower rate than their non-sugary cousins and Egypt has no apparent plan to tax sugary drinks at all. It's hard to see what lessons could be learned from those examples.

Damn lies? Or compelling evidence?

“Only a few countries [with sugary-drink taxes] have actually done proper evaluations,” Sinne Smed, from the University of Copenhagen, told EUobserver.

“Mexico is one example where they've actually proved a positive effect in terms of health and consumption.”

Much of the rest of the evidence is based on models and projections.

Smed, whose research on Denmark was used in the WHO's report, explains that properly set up simulations can also provide entirely valid evidence.

But perhaps this reliance on models rather than real-world examples explains why, after an initial blaze of publicity in newspapers around the world, the WHO report has not made many waves in Europe.

The European soft-drinks industry group UNESDA didn't even put out a statement, a spokeswoman saying that nothing in the report changed their position that such taxes were inherently regressive and did not work.

However, free-market economist Chris Snowdon of the UK-based think-tank Institute of Economic Affairs, who has written extensively on Denmark's fat tax, was incensed by the report's handling of the evidence.

In a blog entitled “the WHO is lying about food and drink taxes”, he dismissed as “sheer bullshit” the WHO's central claim – that there was growing evidence that taxing sugary drinks between 20 percent and 50 percent, along with huge subsidies for fruit and vegetables, would improve diet and reduce disease.

“The WHO should really stick to its area of expertise and leave tax policy to people who understand it,” he told this website in an email.

The argument very much depends on your understanding of “evidence”. Snowdon wants empirical evidence, of which there is close to zero. On the other hand, there's plenty of theoretical evidence based on models.

No fat? Try salt instead

Whatever the rights and wrongs of this dispute, the WHO's brief rendering of Denmark's experience oversimplifies the successes at the risk of misrepresentation.

The claim that the tax saved lives is laid out more fully in an article by Sinne Smed in the European Journal of Clinical Nutrition.

She analysed data on the purchasing habits of 2,500 Danish households before, during and after the fat tax, and used a mathematical model to estimate how the changes in diet would affect annual deaths from non-communicable diseases.

Her paper concluded that “the saturated fat tax made a positive contribution to public health in Denmark, with an estimated 123 averted deaths per year”.

But the article is very clear that this is a “modelled reduction” rather than an actual reduction, a nuance that is lost in the WHO report.

Another detail in Smed's article that doesn't appear in the WHO report is that, during the time the fat tax was in force, Danes ate less fat but more salt, which is associated with other illnesses.

“If you think about your own diet – what provides taste?” she told this website. “It's sugar, it's saturated fat and salt. If you remove one of these elements, you might add a bit more of another element.”

She suggested that such adverse side effects could be controlled through careful design of the tax system.

Just a spoonful, or 12

Another reason the report was not jumped on by European lobbyists was because the WHO's European branch has already been campaigning for such measures.

Dr Joao Breda, who heads WHO Europe's nutrition, physical activity and obesity programme, says “pricing policies” such as taxes and subsidies are part of a broader range of measures to combat obesity.

He told this website that economic measures were not a “silver bullet”, and part of their function was to encourage companies to change their product lines and reduce sugar content, rather than punish them.

Industry bigwigs are unlikely to agree. In an article in the New Statesman published just before the report was released, Coca-Cola Great Britain & Ireland boss Jon Woods laid out some of the industry's arguments in response to the UK's planned levy on sugary drinks due next year.

“It doesn’t seem logical to create a tax that focuses on only some of the sugar we consume,” he wrote.

“It’s targeted specifically at soft drinks (and even then not all soft drinks, with milkshakes and coffee-drinks being exempt) – the one category which has reduced sugar significantly.”

On this last issue, Dr Breda might just agree.

“If you go to buy a coffee and it has 10 to 12 spoons of sugar, everyone accepts this is bad,” said Dr Breda. “The industry might have a point.”

He hints that a solution should be sought that controls these drinks too. Probably not the answer Woods had in mind.

Whether the WHO's aim of further taxation gets going, of course, depends on the appetite of national governments to impose greater costs on those who are often at the poorer end of their societies.

Portugal is the latest country to announce a planned levy on sugary drinks.

It will join other EU countries Hungary, Finland and France in raising taxes through sales of sugary drinks.

Ironically, the Portuguese are among those least in need of a tax in Europe - sales of sugary drinks there fell by 19 percent between 2010 and 2015, according to recent research.

The biggest guzzlers in Europe are the Belgians, Dutch and the Germans - none of whom have a sugary drinks tax.

Another country with no immediate plans for a sugary drinks tax is, of course, Denmark.

The smaller political parties still discuss imposing taxes on unhealthy products, says Sinne Smed, “but it seems like they're not on the political agenda at the moment”.