Denmark
Hopes Cheaper Soda Will Boost Economy
High value-added taxes and easy border access have long drawn
Danish consumers to German grocery stores. Now, the government in
Copenhagen hopes that repealing a tax on soft drinks and beer will reduce
cross-border shopping and boost the domestic economy.
The Danish government is abandoning a beverage tax that it says is
costing the country millions of euros as consumers cross the border to shop in
Germany instead.
The tax on soft drinks is to be halved by July and completely abolished
by next year, making a 1.5-liter bottle of soda three kroner (€0.40) cheaper in
the end. The lesser tax on beer is to be cut by 15 percent by July.
Finance Minister Bjarne Corydon told public broadcaster DR on Monday
that the tax's repeal, which has broad support in parliament, would provide a
"powerful growth spurt" to the Danish economy.
Cross-border shopping is nothing new to Denmark, as many goods have long been more
affordable in Germany and much of the population lives a short trip away from
Schleswig-Holstein, Germany's northernmost state. However, the tax on soft
drinks and beer, implemented to encourage healthier drinking habits,
dramatically increased the traffic.
A report commissioned by the Danish grocers' association DSK last year
found that 57 percent of Danish households had crossed the border into Germany
to buy beer or soft drinks over the past year -- the highest number ever
measured in the regularly conducted study.
'Fat Tax' Also Abandoned
Lothar Raasch of the Chambers of Commerce and Industry in
Schleswig-Holstein told news agency DPA the changes would have
"substantial implications" on cross-border trade, and that soda and
beer are "the core business." However, he added that German
businesses have long adapted to attract Danish consumers, stocking greater
varieties of goods and diversifying the products they can offer at cheaper
prices.
The decision comes months after the government in Copenhagen repealed a
similar tax on foods with high concentrations of saturated fats -- dubbed the
world's first "fat tax." The measure was introduced with the intent
to incentivize healthier eating, but authorities said it ultimately just drove
up food prices and put jobs in jeopardy.
The soda tax repeal is part of a broader plan by the center-left
government of Prime Minister Helle Thorning-Schmidt to make the Danish economy
more competitive. She also plans to cut local business tax and tax credits for
apartment and home renovations, coupled with reductions in spending on social
welfare and state aid to university students.
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