The basis for the inquiry, led by Phil Hogan, Commissioner for Agriculture and Rural Development, is that certain meat and dairy products were exempt from the law, creating an unfair advantage for certain manufacturers.
If the Commission decides that this is the case, Denmark would have to collect the extra tax revenue for those producers not originally included, with added compound interest.
The Danish minister of taxation, Benny Engelbrecht, warned that such a decision would place a massive financial burden on the country’s food and drink manufacturers.
"A recovery will be a near impossible task, which among other things will impact many Danish companies, such as farmers, fishermen, etc. In addition to the administrative hassle, there are a lot of people who are going to suffer a financial loss because of this," said Benny Engelbrecht.
"I am puzzled why the Commission raises this case now, when the tax was repealed more than two years ago. But we will do all that is within our power to ensure that this does not become a reality by engaging in dialogue with the Commission to try to find a reasonable solution to the matter," he added.
The law came into effect in October 2011 in a bid to encourage healthy eating and was applied to meat and dairy products, oils and other foods containing more than 2.3% saturated fat. It was later scrapped by the successive government in January 2013, which claimed that it was an administrative burden. Although short-lived, the tax proved to be controversial from the outset, attracting criticism from food industry lobbies, nutritionists and economists. The Danish Butchers’ Association brought legal action against the government on grounds that the fat tax violated the Lisbon Treaty.
The Commission has stressed that its decision to conduct the inquiry, which could last up to 18 months, is based on a purely technical issue.
“The European Commission supports any country’s efforts to develop healthy eating choices, even if they involve taxation measures. But these measures must comply with EU law,” a Commission source said.
The Danish government has said that it will cooperate with the Commission to ensure that no back taxes must be paid.
Denmark banned the use of trans fatty acids in 2005, prompting an EU lawsuit on the grounds that this constituted a trade hindrance. The Danish government contended that the law was legitimate from a public health point of view and the lawsuit was withdrawn in 2007.
The number of Danes who died from cardiovascular disease fell by 70% between 1985 and 2009.