Norway looks to replace sugar tax with tax on food healthiness
Divisions over how and when current levies should be replaced
A committee put together by Norwegian authorities to consider how well the country’s sugar tax is working suggests scrapping the tax altogether and replacing it with a fee based on the healthiness – or lack thereof – of products.
According to the Dyrnes committee, the “sugar fee” on chocolate, confectionery products and non-alcoholic beverages is poorly designed.
“The tax on chocolate and confectionery products is today applied more or less randomly,” says committee leader Cecilie Dyrnes from Ernst & Young to Norwegian wire service NTB.
“There are products nearly identical to each other that have different fees than one another. Products with lots of sugar may not necessarily be covered by the fee, while certain sugar-free products are covered by the fee. The fee is also not graded based on [nutritional] content. It is simply not accurate enough.”
The committee also states that the tax on non-alcoholic beverages is also not optimal, but does not have the same level of issues as the areas of chocolate and confectionary products.
Unified in change, divided in method
While the committee is unified in its conclusion that the current fees are suboptimal, they are divided in the view of how and when they should be replaced, NTB writes.
The majority of the committee agrees that such fees should be justified by the possible health benefits they can provide, rather than simply securing funding for the state. When it comes to how such a system should be structured, the committee recommends that the government puts together a new committee with a much longer time frame to consider this.
“Introducing a health-based fee is challenging in many ways because it requires a larger investigation. It will be particularly demanding when it comes to chocolate and confectionary products, as one needs to go into detail about the health reason for the tax,” Dyrnes says to state broadcaster NRK.
The committee justifies the proposed introduction of a health-based fee with the fact that it would capture a larger number of nutrient-poor and energy-intensive foods and support Norwegian public health policy.
“A health-based fee could lead to an extension of the duty to include many more products and producers,” the committee’s report reads.
Norwegian Institute of Public Health and University of Oslo nutrition professor Knut Inge Klepp believes that there are a few steps that the government can already take now.
“In the short term, when it comes to chocolate and sugar tax, we recommend halving the tax on artificially sweetened sweets and similar products. In addition, we recommend reversing the tax on artificially sweetened drinks back to the 2017 level. It will be in line with the health perspective, and it gives us room to do a more thorough investigation that will take some more time,” Klepp says to NTB.
Petter Haas Brubakk from the Confederation of Norwegian Industry’s food and drink association was part of the minority of four in the committee who wanted to completely remove the fees.
“We have had these fees for almost 100 years. They have gone out to date as they are currently designed. We do not believe that taxes have any effect on public health,” says Brubakk to NRK.
He says that sugar consumption has fallen dramatically in Norway in recent years, but this has happened regardless of the fees.
“We are the country in Europe with the highest consumption of sugar-free goods. The Norwegian food and beverage industry is the industry that has come furthest in the world in the area of cooperation with the authorities in order to reach a public health goal,” Brubakk says.
He says to NRK that he believes a complete end of the tax would stop the cross-border trade leak to Sweden and strengthen Norwegian food producer competitiveness.
Klepp has a different take on the matter, as he states that one of the major challenges in the Norwegian diet is the high intake of sugar and energy-rich, nutrient-poor foods.
“In this sense, these fees contribute in a good way to limiting intake, especially among children and adolescents,” he says to NRK.
He fears that the complete removal of the fees altogether could result in a situation in which consumption increased sharply.
“It’s important that you do not remove the sugar fee before you have investigated how such health-based fees should look, what level of taxation there should be and which goods should be included,” Klepp says.
The sugar levy is currently primarily based on fiscal reasoning. In other words, the intention is that it should secure income to the state. The Dyrnes Committee states that these revenues will eventually be reduced if the government does as it proposes.
“If a health-based fee contributes to the desired effect – namely that the consumption of taxable goods is reduced – the state’s income will also decrease,” the report says.
“The taxes on chocolate, confectionery products and non-alcoholic beverages can have a number of effects – including for health, industry, border trade and government revenues. The committee’s report is important for understanding the consequences and dependencies, and provides a good basis for the government’s further work,” says finance minister Siv Jensen.
The sugar tax was introduced in early 2018 as part of the budget settlement between the Conservative, Progress, Liberal and Christian Democrat parties. At short notice, fees increased by 40% on non-alcoholic goods and 80% on chocolate and confectionary products.
The tax was criticised heavily by industry, which stated that the fees were skewed and contributed to increased border trade. The government’s budget for 2019 sought to reverse the tax increase on chocolate and confectionary products, while the tax increase on non-alcoholic beverages remained untouched.
A potential liquidation of the sugar tax is estimated to reduce the state’s coffers by NOK 1.5 billion in tax revenues in 2019.