The First “Fat” Tax?

As world food consumption increases, more people are facing the problem of obesity (http://www.worldometers.info/obesity/). Recently, Denmark has introduced what is believed to be the first fat tax in the world in effort to decrease the health risks obesity brings. Products such as Butter, milk, cheese, pizza, meat and oil are subjected to the tax if they contain more than 2.3% of saturated fat.

Although the intensions of the government is positive, but both the consumer and the producers are heavily impacted by the tax. Since the elasticity of demand and supply are both inelastic (no good substitutes), the producers and consumers will have to suffer significantly as they pay more for the lesser amount. As a result, consumers began hoarding to beat the price rise, while some producers call the tax a bureaucratic nightmare.

Danish officials claim that the new tax will help limit the population’s intake of fatty foods. But people could just buy from alternative suppliers, therefore harming the domestic market. Not only that, if the purpose is to reduce obesity, scientists think saturated fat are less harmful than salt, sugar and carbohydrates, which should be targeted.

http://www.bbc.co.uk/news/world-europe-15137948