'Fat taxes' do work, EU report finds

Specific taxes on sugar, salt or fat do cause reductions in consumption, the European Commission found in a new report. But higher taxes may also merely encourage consumers to go for cheaper products, it warned.

The precise impact of such "fat taxes" on the competitiveness of the European agriculture and food sector still needs to be fully assessed, the report added.

The study, “Food taxes and their impact on competitiveness in the agri-food sector", concluded that food taxes "in general achieve a reduction in the consumption of the taxed products".

But consumers may put in place strategies to circumvent the higher taxation, cautioned the report, which was released by the Commission's Enterprise and Industry directorate. For instance, they might purchase similar products that are less heavily taxed, or turn to cheaper brands.

The EU executive said that food taxes increase the administrative burden, notably if the tax is levied on ingredients, or if the rules defining the targeted products are complicated. Food and drinks taxes may also have a negative impact on employment and investment, the report noted.

Meanwhile, SMEs might be more directly affected by food taxes as consumers often switch to cheaper brands which reduces the competitiveness of smaller, premium brand producers.

A common argument against food taxes is that they raise the price of goods compared to the prices of the same goods in neighbouring countries, which don't have the same taxes. This promotes cross-border shopping.

"However, the study found that increases in cross border shopping were rather limited and that other factors, in particular other taxes on food/drinks, are more important drivers for the cross-border shopping effect," the Commission said.

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