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Can Hungarians be taxed back to health?

July 18th, 2011

The Hungarian Parliament has passed the so-called “chips tax” on unhealthy food. The government expects Hungarians to lead healthier lives as a result, but the extra tax may also have a negative impact on Hungarian producers. Right-wing commentators also question why, if the government is so interested in improving our health, it withdrew plans to increase the tax on tobacco products.

From September, distributors of foods and beverages which contain large amounts of salt, sugar, and carbohydrates will have to pay extra. The government hopes that the new tax will encourage Hungarians to eat healthier food, and thus reduce the number of those in need of health care and welfare benefits. The government also expects 20 billion HUF in extra revenues.

According to the calculations of Heti Válasz, however, the prices of unhealthy products will not rise significantly. A can of energy drink will cost 75 HUF more, a packet of crisps 34 HUF more, and 20 HUF extra will be charged for a 2 litre bottle of soft drinks.

In addition to the benefits of a healthier lifestyle and increased state revenues, the Hungarian government also hopes that the “chips tax” will stimulate small and medium sized Hungarian producers.  Magyar Nemzet expects an increase in the demand for Hungarian fruit, alongside all the other advantages, if Hungarian consumers turn to healthier soft drinks and snacks.

But there may well be unforeseen consequences as well, according to Magyar Hírlap. The Hungarian Trade Association has warned that penalizing unhealthy products will weaken demand. If there is a decline in the consumption of the affected foods and beverages, less value added tax will be paid. Producers may also reduce the level of unhealthy ingredients to avoid paying the extra fee.

Producers of the penalized products estimate that 10 to 20 percent of employees will have to be laid-off, reports Népszabadság. According to the left-wing daily, medium and small scale Hungarian producers will be most affected by the drop in demand.

The message of the new law is that hamburgers are healthy, just go and buy them”, writes András Stumpf in Heti Válasz. He notes that the first draft of the law, originally dubbed a “hamburger tax”, targeted fast food, but according to the final version the price of hamburgers and other non-prepacked items will not be affected.

Stumpf finds it “more than embarrassing” that the government backed down from increasing the consumption tax on tobacco products just hours before the vote. As MP István Balsai explained, the reason for this was  that “the tobacco lobby was stronger.”

The blogger Doktor Kottász in the right-wing Mandiner blog site also finds the government’s policies on promoting healthier consumption contradictory. The final version of the “hamburger tax” does not penalize fast foods, and the same government that banned smoking in bus-stops and pubs has backed down from increasing the tax on tobacco. “We said a lot of nice things, we had principles and aims, but then the lobby comes along, and everything goes up in smoke.”

“The [government] should never have got into such a situation. … Hungarians certainly do not tolerate intrusions into their eating habits in the name of national health.” Doktor Kottász suggests that Hungarians infuriated by such health food policies may take  revenge on the government at the ballot box.

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