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July 20th, 2012

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It is looking increasingly likely that the tax on sugar and some products containing sugar due to come into effect on 1 January 2013 will be dropped when parliament gets back to work following the summer holiday. 

Businesses have railed against the tax since it was first proposed as a way to encourage people to eat less sugar, while at the same time generating an extra 1.3 billion kroner in revenue.

Although coalition member Radikale was originally one of the sugar tax’s main proponents, it now says the idea should be “buried”.

“For us, the idea wasn’t just to bring in a billion kroner from producers and consumers, we also wanted it to have a positive effect on health,” Radikale spokesperson Nadeem Farooq said. “It does not seem that the right model can be found.”

He will ask the tax minister, Thor Möger Pedersen (Socialistisk Folkeparti), to take the matter up with the government later this summer and to look for alternatives for the funds that will be lost by dropping the tax.

Those funds, though, have already been included in coming economic forecasts, and until income to replace them can be found, the tax is staying put, according to representatives from Socialdemokraterne, the prime minister’s party.

Politiken newspaper reported that the government is having trouble finding an effective way to implement the tax.

One proposal suggested that the tax be placed on a product’s total weight. Under that scenario, a large container of yoghurt may have wound up costing much more than a cake filled with cream, effectively defeating any health benefits the tax was supposed to create.

Another option on the table was to simply tax sugar itself. The question then became, what kind of sugar? Fructose, corn, beet are just a few of the many types of sugars found in processed food. It would have been administratively unwieldy to assess individually the type and amount of sugar in thousands of products available to consumers.

Since a workable model could not be found, the sugar tax appears to be dead, opening the door for a new political battle about how to get the missing funds back into the budget.

Although Enhedslisten supported the government’s budget, it has never been onboard with the sugar tax, feeling that it was a levy that would hit low income people the hardest.

“We are entirely ready to remove the sugar tax,” Per Clausen (Enhedslisten) said. “The missing funds must come from people with high incomes to help ease the tax burden created by the budget.”

The proposal to tax sugars came after parliament last year implemented what was reputed to be the world’s first tax on saturated fats in foods and the message that the sugar tax was on the way out was celebrated by businesses, which had estimated it would cost 1,000 jobs.

“This is positive news,” Jens Klarskov, from Dansk Industri, the nation’s largest business business advocacy group, said. “We have had enough ‘fun’ dealing with last year’s fat tax.”

Claus Bøgelund Nielsen, from DSK, a grocer’s association, said the government and Enhedslisten deserved praise for rethinking the tax.

“It is great that they listened to good advice and solid evidence, rather than sticking to a really bad idea,” Nielsen said.

Nielsen added that Germany and Sweden would have been the only winners had the tax been implemented, as more would chose to go to those countries to shop.