Importers of food and drink to European countries that impose a ‘sin’ or ‘fat’ tax should pay close attention to how it impacts the market, according to one expert specialising in EU food law.
In countries such as France, which recently imposed a levy on sugar-sweetened beverages, the taxes appear to be “origin neutral”.
However, food lawyer Ignacio Carreño from the law firm FratiniVergano in Brussels, said: “It should be closely analysed whether there is, in practice, a higher tax burden on imported products subject to these taxes.”
He also suggests that third country governments and producers, “must monitor these legislative actions closely and assess the impact that they may have on their products, market access opportunities and conditions of competition”.
Carreño’s comments on ‘sin taxes’ were made in this month’s issue of the FratiniVergano publication, “Trade Perspectives”.
Hungary, Denmark and Finland have all introduced so called ‘sin’ or ‘fat’ taxes on food and drinks thought to be linked with poor health and obesity. Belgium, Ireland, Romania and Sweden are said to be actively considering a levy but industry is weighted against it.
The pan-European food industry body, Food and Drink Europe, has opposed fat taxes as “discriminatory”.
Meanwhile, the Danish Butchers Association (DSM) recently mounted a legal challenge against the Danish government. DSM claims that the tax levied on foods containing more than 2.3 per cent saturated fat, distorts competition between small and large businesses and violates the Lisbon Treaty. Also that it creates inequality between domestic and imported products.
Carreño outlines that the obligation to pay the French tax, set at €0,072 EUR per litre or approximately 0,024 EUR for a 33cl can, is incumbent upon manufacturers of these drinks established in France and on importers. So it also applies to imported products.
He believes that from an EU perspective, the ‘sin taxes’ of France, Denmark and Hungary “appear to be indirect internal taxes that are not harmonised in the EU”.
He states: “In general, EU Member States may introduce and maintain non-harmonised internal taxes and freely establish their modalities.”
However he adds that such taxes must comply with the Treaty on the Functioning of the European Union. In particular Article 110, which prohibits internal discriminatory taxation, directly or indirectly, on products of other Member States, in excess of that imposed directly or indirectly on similar domestic products.
Carreño also anticipates that the implementation of such taxes may result in discrimination against third country products, drawing attention to Article III:2 of the GATT. This prevents WTO Members from applying to imported products internal taxes in excess of those applied to domestic products so as to afford protection to domestic production.
He writes: “The French tax appears to be origin-neutral, but instances of discrimination relevant to France’s WTO obligations may nevertheless occur where the tax de facto favours domestic production of like or ‘directly competitive or substitutable’ products.”
Carreño declined to be interviewed by FoodNavigator.com.