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Health tax discourages sugar alternatives, says Hunbisco

By Oliver Nieburg+

30-Oct-2014
Last updated on 30-Oct-2014 at 14:56 GMT2014-10-30T14:56:43Z

Hungary's sugar tax has put a bottleneck on healthy reformulation and has led to 1,000 job cuts, says Hunbisco
Hungary's sugar tax has put a bottleneck on healthy reformulation and has led to 1,000 job cuts, says Hunbisco

Hungary’s confectionery association Hunbisco says that the national tax on sugar puts a financial strain on confectioners to explore sugar alternatives.

Anna Benke, secretary general of Hunbisco, accepted that high sugar intakes were linked to diseases such as type 2 diabetes, but said that a health tax was not the answer and bottlenecked efforts to move to healthier alternatives.

“Of course we are exploring sugar alternatives but there’s not enough money for innovation and marketing because of additional payments,” she told ConfectioneryNews.

The Hungarian sugar levy

In 2011, Hungary introduced a tax on products with a high sugar or salt content. The tax is calculated based on the turnover of a company and the percentage of sugar per 100 g of the product. “Because of the sugar, it’s on all the chocolate and confectionery products,” said Benke.

Hungarian confectioners must pay the health tax on top of a 27% value added tax (VAT).

“It can add up to 35-40% of the product,” said Benke. “It’s very high and obviously this is not good for confectionery manufacturers.”

Job losses

“Some of the companies even the multinationals have had to axe some working places,” she said.

Since the tax was introduced, 800-1,000 Hungarian confectionery industry employees have been fired at firms such as Roshen-owned Bonbonetti. Benke said that €3.2m ($4m) of investment in the industry was not made as a result of the tax.

What is the impact on consumption?

Hunbisco ordered a study from  PricewaterhouseCoopers (PwC,) which concluded that while consumption of products subject to the tax in Hungary had decreased since 2011, consumption of products that don’t fall under tax but have similar nutritional characteristics, such as popcorn, had grown.

A recent study by ECORYS for the European Union also found that health taxes could reduce consumption of the taxed products, but not necessarily of the targeted ingredients such as sugar, salt and fat. It called on more research to assess the competitiveness of EU industries.

Consumer education

Hunbisco says it has tried to negotiate with the Hungarian government to scrap the tax in favor of educating consumers to make better choices. “But they are not very open to solving the health issues together. There’s a constant negative communication from the government health authority against our products,” said Benke.

According to the Hunbisco secretary general, previous industry education initiatives had led to a positive shift in consumer chocolate consumption behavior.

Six years ago, 50% of seasonal chocolate in Hungary used compound chocolate - which contains cocoa powder instead of cocoa butter and is considered ‘empty calories’ because consumers don’t get any benefits from flavanols. Now, 90% of seasonal chocolate in Hungary is made with cocoa butter.

Looking for government dialogue

“I hope that soon we can start a fruitful cooperation with the government,” said Benke.

Danish confectioner Toms previously told this site that a health tax in Denmark had led to confectionery tourism to Germany to secure a better price.

However, the ECORYS study found that increases in cross border shopping from health taxes were limited.

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