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Revenues from tax on sweets exceeded all expectations

More than the anticipated EUR 100 million were brought into the state coffers, while sales of candies seem to have declined


Revenues from tax on sweets exceeded all expectations
Revenues from tax on sweets exceeded all expectations
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By Päivi Repo
     
      From the state’s point of view, the tax levied on sweets, ice cream, and soft drinks last year succeeded beyond all expectations.
      Instead of the anticipated EUR 100 million, the tax revenue windfall was about EUR 134 million.
      In 2012, the proceeds are expected to amount to EUR 200 million, as the tax was increased from EUR 0.75 to EUR 0.95 per kilo.
      Even that is only half of the target set by the government programme.
     
The idea is to convert the tax on sweets to a tax on sugar, in which case it should be paid for several products.
      Until now it has been possible to avoid the tax by products that could be regarded as biscuits.
      A working group set up by the Ministry of Finance will submit a recommendation for tax models by the end of November.
      The easiest route would be to expand the current model. The tax could be extended to include buns, cakes, and yoghurts containing sugar as well.
     
In addition to increasing tax revenues, the aim was to encourage people to eat more healthily, when goodies would have a premium attached.
      The National Institute for Health and Welfare estimated last year that a tax of one euro per kilo would in the long run reduce everyone’s weight by 1.4 kilos.
      Moreover, it would reduce the occurrence of type 2 diabetes by 6 per cent.
      According to a lifestyle study by the National Institute for Health and Welfare in 2011, there is no major change on the horizon.
      The study found that about 20 per cent of men and 24 per cent of women ate chocolate or other sweets at least on three days a week.
      These readings have remained more or less unchanged since the end of the last decade.
     
Owing to the tax increases, the price of loose candy rose by 15 per cent and that of chocolate by 20 per cent. The shelves of stores do not exactly seem to be emptier of sweets, but candy firms have certainly noticed the consequences.
      ”In terms of kilos, the consumption of sweets declined by 4 to 5 per cent last year”, estimates David Nuutinen, Managing Director of Leaf Finland and chairman of the Chocolate, Sugar, Confectionery and Biscuit Industry Association.
      ”The tax was clearly noticed last year”, says also Tom Lindblad, Managing Director of Fazer Confectionery, adding:”Sales volume declined by 3 to 4 per cent. This happened for the first time in many years.”
     
Every Finn ate about ten kilos of sweets in 1998, but in 2007 the annual consumption was already slightly over 14 kilos. It does not take a mathematician to see that this makes for well over one kilo per month.
      ”The tax reduced our sales slightly”, concurs Kari Luoto, Managing Director at the Finnish Grocery Trade Association.
      This decline was reflected particularly in the sales of loose candy.
     
The sales came down last year also because shops stocked up on items prior to the introduction of the new tax and did not buy new goods to the same extent.
      A few weeks ago, the loose candy firm Karkkikatu Oy reported that its sales declined by 18.5 per cent.
      Karkkikatu is a subsidiary of Leaf. However, both Nuutinen and Lindblad can see a slight growth for this year.
      ”The market seems to have grown just a little, but the increase is smaller than last year’s decline”, Lindblad estimates. ”A slight rebound after the drop”, Nuutinen characterises. ”Positive development can be seen particularly in the sales of pastilles and chocolate”, he adds.
     
The tax on sweets was last in force in 1999.
      It came to an end, as the European Commission did not approve the tax-exempt status granted to xylitol in Finland. The Commission insisted that xylitol was parallel to other sweeteners.
      The second administration led by Matti Vanhanen (Centre) rediscovered the candy tax, imposing it on sweets, soft drinks, and ice cream.
     
There was arguably good cause for the move. Within Europe, Finns are the second heaviest consumers of sugary sweets.
      According to statistics gathered by the European umbrella organisation of the Confectionery and Biscuit Manufacturers’ Association, every Finn consumed almost 7 kilos of sugary sweets in 2009. Only the Swedish candy eaters outnumbered the Finns with their more than 8 kilos per person.
      The amount of chocolate consumed was almost as high hereabouts, but in this respect we are in the middle of the pack. Norwegian and German consumers ate slightly more than 9 kilos of chocolate per person, while Britons munched almost 12 kilos and Swiss nationals put away more than 10 kilos in that year.
     
Our taste seems to be becoming more mainstream European.
      ”The consumption of chocolate is growing at the expense of sugary sweets”, says Tom Lindblad. ”One reason for this is the candy tax”, he adds.
      In particular the popularity of dark chocolate is increasing among Finnish consumers year after year.
     
     
Helsingin Sanomat / First published in print 4.8.2012


Previously in HS International Edition:
  Government to implement planned tax on sweets, ice cream and soft drinks (17.9.2010)

See also:
  Planned tax on sweets to include ice cream (12.3.2010)
  We´ve had the Booze Cruise, make way for the Candy Rally (1.9.2009)

Links:
  National Institute for Health and Welfare
  Finnish Grocery Trade Association

PÄIVI REPO / Helsingin Sanomat
paivi.repo@hs.fi


  7.8.2012 - THIS WEEK
 Revenues from tax on sweets exceeded all expectations

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