Hungary Tries a Dash of Taxes to Promote Healthier Eating Habits

Click here to read the New York Times article by SUZANNE DALEY (from March 3, 2013). This week in my micro class, we read a chapter from the book The Economics of Public Issues on obesity in the U. S.. There are two major trends that have lead to weight gains in recent decades: More sedentary jobs (their relative pay has increased) and lower relative total cost of food (including preparation time).

As the article says, "Nearly two-thirds of Hungarians are overweight or obese, and the country has the highest per capita salt consumption in the European Union."

So what has the government done?

it "...has, in the past 18 months, imposed taxes on salt, sugar and the ingredients in energy drinks, hoping both to raise revenues and force those who are eating unhealthy foods to pay a little more toward the country’s underfinanced health system"

 Other excerpts:

"Hungary has one of the lowest life expectancy rates at birth in the European Union: in 2011 it was just 71.2 years for men and 78.7 for women. In 2009, the most recent statistics available for all 27 members of the bloc, life expectancy in the group averaged at 76.6 years for men and 82.6 years for women."

"But critics point out that the new interest in food taxes just happens to coincide with tough economic times in Europe. Some say the taxes are as much about raising revenues in a politically acceptable manner as they are about promoting healthy habits. And they worry that the taxes do, in fact, hit the poor the hardest. 

One effort to raise taxes on saturated fat has already failed spectacularly. In October 2011, Denmark became the first country to institute such a tax, raising the price of meat, dairy, edible oils and fats, margarine and other blended spreads, among other items. Fans of the effort thought Denmark was perfectly positioned to make such a tax work, because it already had rigorous labeling requirements, an efficient administration and companies used to making these kinds of adjustments. 

But barely a year later, Denmark gave up on the tax. In the end, experts say, the effort was undermined by political battles, pressure from the food industry and a population that quickly learned to go over the border to Germany to buy the products it wanted."

"The move to institute food taxes in Hungary began ambitiously. It was first nicknamed the “hamburger tax” and included the idea of a tax on fast food. But the effort was later renamed a “chips tax,” skirting the issue of fat altogether, a change that many people attribute to lobbying by multinational corporations. And in the end, the taxes were applied only to packaged foods, making it easier to carry out. The rates vary depending on the food group: adding, for instance, about 13 cents to the cost of a 100-gram, or nearly 4-ounce, chocolate bar, or about 20 cents to a small bag of potato chips. 

But many Hungarians just do not think the taxes are working and see the effort primarily as a revenue-raising instrument..."

"Sales of salty and sugary foods have dropped in the last year, officials said. But it is hard to tell if the taxes had much to do with it. Hungarians, struggling with high unemployment and a dismal economy, bought less of all kinds of foods last year"

many "...customers were not particularly aware of the special taxes on products like powdered soup mixes, jams and chocolate, because the government had raised sales taxes at roughly the same time, making many purchases more expensive."

"The government hoped to collect 20 billion forints, about $88 million, from the food taxes last year and fell 3 billion forints, or about $13 million, short. One reason was that energy drink makers quickly changed their products to duck the tax."

An industry rep said "...taking salt out of a product can have serious technical consequences. In many cases, it serves as a preservative.""

and "...much of the salt that Hungarians consume is not actually from prepackaged foods but from salt added to food cooked at home."