Confectionery taxes doomed to fail in EU after Finland ruling?

Finland’s confectionery excise tax will be abolished in 2017 after the European Commission said the levy may violate EU state aid laws.

‘Not seen as neutral’​

“The problem with the confectionery tax was that it was not seen as neutral, as candies and chocolate were taxed, but not biscuits and mousses/puddings - this resulted to an increase in new biscuit products which had a higher sugar content, resembling candy more and more,”​ said Sebastian Hielm, director of food safety at Finland’s Ministry of Agriculture and Forestry.

Finland’s Parliament voted yesterday to scrap the tax on confectionery, ice cream from January 1, 2017, following a proposal from the Finnish government.

Finland’s food and drink taxes

Finland introduced a tax of €0.95 ($1) per kilo on confectionery and ice cream in 2011. The tax on both categories will be scrapped from January 1, 2017.  The country already has a tax on all beverages expect milk. The drink tax will remain in place, but from 2017 cow milk substitutes (soy, rice, oat and other plant based drinks) as well as ice cubes will be tax-free.

No alternative tax on foods high in sugar has been proposed despite calls for an all-encompassing sugar tax from one Parliamentary committee.

State aid rules​

Finland’s former prime minister Anneli Jäätteenmäki, now a member of European Parliament, recently asked the EU Commission​​ if a tax on all products with added sugar would violate EU state aid rules.

The Commission said last month any tax measure that “favors certain undertakings”​ or “the production of certain goods over others”,​ which are comparable (or contain just as much sugar), constitutes state aid.

But it added a caveat to say favoring some products over others through tax measures is allowed if it can be justified.

This exception may permit taxes on soft drinks, which has been flagged as a major source of added sugars in childrens’ diets. However, confectionery may be sparred as a standalone taxed category.

Developments in Finland​

Jäätteenmäki is a member of the Centre Party in Finland, which has been in power since 2012.

The social affairs and health committee of the Finnish Parliament in October this year​​ gave its support for a new sugar tax on foods and beverages to replace the outgoing confectionery and ice cream tax.

“The Committee considers that the development of health-based excise duties should be initiated promptly,”​ it said. “In the first stage, the health-based tax would target the amount of sugar in food.”​

But Heli Tammivuori, director of Finland’s Food Association ETL, told this site: “The committee liable for reporting to the Parliament on this law proposal is the Finance committee ​[not the social affairs and health committee] and this committee supported the government's proposal to abolish the sweets tax and not to impose any compensatory food taxes.​

“Yesterday (December 13), the majority of the Parliament of Finland supported the government proposal. This means that the sweets tax will be abolished from January 1, 2017 and there will be no new food taxed for the time being," ​she said.

Race on for reduced sugar confectionery

Nestlé this month said it had developed a faster-dissolving sugar that can reduce sugar in chocolate by 40%​​. It plans to use the sugar – which it says has no impact on taste - in some of its confectionery range from 2018.

Taxes impacting confectionery​

Finland, Hungary and Mexico have taxes affecting certain confectionery products. Most other state food taxes – such as those in France – are limited to sugary drinks.

• Mexico has a tax on foods containing 275 kcal, which was introduced at the same time as its sugar-sweetened beverages tax in 2014.
• Hungary introduced a tax on foods high in sugar, fat or salt and sugary drinks in 2011. The tax is calculated based on the turnover of a company and the percentage of sugar per 100 g of the product. 
• Denmark has had an excise duty on chocolate and candy since 1922.

Calls are growing for a sugar tax in Australia after a group of medical professionals encouraged a levy on sweet drinks to help curb obesity.

Food industry body the AI Group – whose members include Mondelēz and other confectioners– said in a statement last month there was no quick fix solution to the nation’s complex obesity problem. “…It is not beneficial to blame or tax a single component of the diet,”​ it said.

ConfectioneryNews wrote in a comment piece​​ in March this year that confectionery could be the next victim of taxes after soft drinks as sweets & snacks is the second biggest contributor to added sugar in the American diet, according to the WHO.

Developments in Finland may thwart confectionery-specific taxes in Europe, but candy high in added sugar may still face levies under multi-purpose sugar taxes covering all food and drink categories.