Monday, October 3, 2011

Denmark’s Coconut Oil Tax Is Just a Tax

Over the weekend, Denmark became one of the few countries to specifically tax food. The new “coconut oil” tax is based on the saturated fat content of food. The government says the new tax may encourage citizens to eat more healthy food, but the tax falls most heavily on coconut oil, a very healthy food, and lard, a very unhealthy food, with no distinction between them.

And the fact is, saturated fat is an essential nutrient. It forms cell walls and other essential parts of the body and carries three of the best-known vitamins. Most people eat more saturated fat than they ideally should, but when scientists experiment with diets that attempt to eliminate saturated fat, the result is an increase in cardiovascular disease and other degenerative diseases as cell walls begin to break down. That is, a no-saturated fat diet (actually having 1 or 2 percent of food energy from saturated fat, because it isn’t possible to eliminate all saturated fat) is more harmful to health than a high-saturated fat diet. The latest scientific evidence suggests that saturated fat does little harm in itself, and that most of the problems associated with saturated fat come from the absence of fruits and vegetables, which generally have high nutritional value and exceptionally low levels of saturated fat.

The tax won’t particularly shape consumer behavior either. It may sound shocking that coconut oil will now cost $30 per kilogram, but a chef doesn’t really use coconut oil by the kilogram, and if you are determined to eat healthy, an extra $2 in the price of an ingredient is not likely to stop you. On the other side, the people who don’t really pay attention to what they eat probably also won’t notice that a donut now costs 25¢ more. So the new tax is really just a tax, a way to transfer money from citizens to the government by making them pay more for their food.

Food taxes are rare for a reason. Everyone needs about the same amount of food. Food taxes push poor people deeper into poverty while having minimal impact on rich people. This makes food taxes an unpopular and morally questionable revenue device. The “coconut oil” tax has other failings, including administrative difficulties and a suspicion that it falls more heavily on domestic producers than on importers. In Denmark, political observers are betting the new “coconut oil” tax will be repealed within a year. If the government cannot repeal the tax, it must at least revise it to make some kind of distinction between health food and junk food. A more sensible version of a food tax, for example, would simply tax all foods other than fruits and vegetables.