From Iceland — Tax On Sweets May Be Raised By 20 Percent

Tax On Sweets May Be Raised By 20 Percent

Published November 27, 2020

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The working group for the Minister of Health has submitted a proposal for the raising of taxes on sweets, RUV reports.

The working group was formed to formulate proposals on how to use financial incentives to promote public health. Their latest suggestion is to significantly raise the tax on sweets and sugary drinks, by up to 20%.

According to the proposal, the higher taxes will cover soft drinks, energy drinks, water-based drinks that contain citric acid, sweets, energy and protein snacks, biscuits, cakes and pastries.

Some doubts, however, have been raised about the impact the tax rise will have. Ólafur Stephensen, managing director of the Association of Icelandic Employers, spoke to Morgunútvarp earlier this year, saying raising these taxes will increase hassle and cost, adding an extra VAT level where all food has previously been placed in the same tax bracket.

Ólafur also pointed out that previous attempts to raise the tax had no effect. “The old sugar tax had no effect on consumption. The results of research on sugar taxes in many parts of the world are contradictory and there are many indications that they do not work.”

However, an appendix to the proposal says that the World Health Organisation estimates that a 20% tax raise on these unhealthy products can reduce consumption by the same percentage. An Icelandic study shows that for every 1% increase in tax, consumption decreases by 1%.

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