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Why do-gooding ‘sin taxes’ always stink of politics

24 November 2012

2:30 PM

24 November 2012

2:30 PM

Nutella may have been created by Italians, but it is the French who really love it. The hazelnut spread is a fantastically popular accompaniment for everything from bread for breakfast to crêpes for a delicious dessert. Yet the French Senate, in its infinite wisdom, decided that Nutella should be taxed. The proposal was voted through the Senate, before being stopped by a very unlikely coalition of Communists and conservatives. The plan to impose a ‘sin tax’ on Nutella in France was obviously ludicrous; but it was also full of politics.

Sin taxes and green taxes may look like an efficient intervention on an economist’s blackboard; but they never live up to the wide-eyed optimism of enthusiastic technocrats. They always end in an ugly political stitch-up. The logic behind all of these taxes is that markets don’t work efficiently. The thinking is that some people simply can’t be trusted to make decisions; they eat, drink, smoke or drive too much, so you, the legislator, need to set them straight. The reality of this intention is always ugly: politicians cannot understand and measure what is in the best interests of every citizen, or the costs we impose on each other, let alone predict how a new tax will change things.

Senator Yves Daudigny, who proposed the Nutella Tax, claimed that he was looking out for people’s health by taxing the palm oil in the spread. He may have been genuinely concerned; but his proposal was full of raw politics, too.

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Nutella’s popularity is a valuable asset for the Italian company that manufactures it, Ferrero; and, as this article in the French press illustrates, the French supermarket chain Casino wants a piece of the action. Casino market their new spread by describing how it contains the same thirteen per cent hazelnuts and seven per cent cocoa as Nutella; but Nutella includes palm oil, whereas their product does not. The new tax would have either forced up Ferrero’s costs directly (by adding €300 to the existing tax of €100 for every tonne of palm, coconut and palm kernel oil they use, forcing them to change more expensive or unsuitable ingredients) or put the state’s imprimatur on claims that their products are unsafe. Never mind that the French have eaten Nutella happily for decades, the proposal would have made it easier for Casino to win market share.

This is hardly the first time that the tax system might have been used to chase grubby political or commercial advantage. Britain is thought to have become a beer-drinking nation because of high taxes on French wine and spirits in the early eighteenth century. Recently the European Commission has seized on everything from a carbon tax to a financial transactions tax as a means to get what it really wants: an EU tax which can end its dependence on sceptical national governments.

None of that makes sense in the dry world of optimal tax theory. But economists who think they are advocating a more enlightened tax policy are often simply supplying arguments for one side of a grinding political war between competing economic interests. That is why sensible people hold their nose when they approach any tax. Taxes stink whether they are taxes on your income, your drive to work, your house or your Nutella. Taxes will always be with us: governments need our money. But don’t trust any politician who tries to tell you that a tax is good for you. Don’t listen to anyone who says that the foul smell emanating from their latest proposed levy is really some sweet fragrance. They are out to rip you off.

Matthew Sinclair is the Director of the Taxpayers’ Alliance.

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Show comments
  • TheTurnipTaliban

    I want to tax wind power, Guardian readers, Kafka-esque social workers and the smug, preening self-righteous Twittering cunts who run this country.

    • http://twitter.com/ianwalkeruk Ian Walker

      well, that’s the national debt sorted, but what are you going to do in the second week?

  • http://british-news-portal.co.uk/ apt-get

    “The hazelnut spread is a fantastically popular accompaniment for
    everything from bread for breakfast to crêpes for a delicious dessert”.

    Are you on pay-per click advertising 🙂 (jk)

  • Sally Chatterjee

    The hazelnut paste on which Nutella is based was popularised after the Italians in Turin tax on cocoa imports in the mid 19th century.

  • William Blakes Ghost

    But don’t trust any politician who tries to tell you that a tax is good for you. Don’t listen to anyone who says that the foul smell emanating from their latest proposed levy is really some sweet fragrance.

    Which is why the Tax Avoider witchunt has such a foul odour about it. The only reasons the politicians keep peddling such malicious propaganda is in order to hide their collective and complete mismanagement of the economy over the last 20 years.

    Tax avoidance should be a national pastime (it always used to be) and its the best way to keep our parasitic political classes in their place. After all isn’t about time HMRC did their jobs properly?

    And for all those suckers who are paying their full wack of corporation tax I say hire an accountant. It will be cheaper for you in the long run. Don’t feel guilty because until the likes of Cameron and Miliband ()as much to blame for the current scandalous energy situation as the Coalition) stop wasting our money then why should we throw good money after bad it to them?

  • Noa

    “I’m doing this for your own good”,

    always sounds better than

    “I can’t manage on the money I’m already taking from you.”

  • http://twitter.com/Theo_Clifford Theo Clifford

    Taxing Nutella is a bad idea.

    But is taxing fuel or cigarettes really worse than taxing *productive work*? If you believe that taxes have large negative effects, that only makes it more important to raise those taxes in the least damaging and distortionary way.

    • HooksLaw

      If governments did not spend money we would not need taxes. It will take decades of relentless pressure to bring govt spending down to what we can afford. But it is the public who always want the soft option of govt spending.

  • Troika21

    “The logic behind all of these taxes is that markets don’t work efficiently.”

    That’s wrong. The ‘logic’ is that the activity associated with the tax produces negative externalities that are not incorporated or reflected in the price of the thing in question.

    For example we tax tobacco so heavily (in part) because of the costs of treating lung cancer on the health system, not because it is a ‘sin’ in the moral sense (and I do wish these things were not called as such).

    I’m sure politics has a lot to do with much of this sort of thing, but these taxes do have there part to play in economies. I’d rather smokers pay a ‘sin tax’ than my NI raised.

    • Rhoda Klapp

      Every smoker who dies early saves the NHS a ton of money.

      • HooksLaw

        They save our pension bill lot of money. Those that do not die early cost the NHS a fortune.

  • Hexhamgeezer

    ‘Britain is thought to have become a beer-drinking nation because of high taxes on French wine and spirits in the early eighteenth century’

    So we were a wine drinking nation before that?

    I don’t think so. Our climate is better for barley and not grapes. Culturally we have always drunk ale as did any significant influxes that produced the Scots, English, Irish and Welsh. Wine keeps better than beer in warm climates.

    No doubt the Spec’s ancestors have a long tradition of wine drinking going back to the Conquest but not us plebs.

  • DavidDP

    Taxes to compensate for negative externalities are perfectly legitimate, and in fact should really be the first port of call for government taxes. Heather tis particular example is really such a tax doesn’t change that.

  • Bluesman

    But don’t trust any politician who tries to tell you that a tax is good
    for you. Don’t listen to anyone who says that the foul smell emanating
    from their latest proposed levy is really some sweet fragrance. They are
    out to rip you off.

    You’ve met Ed Davey then?

  • Rhoda Klapp

    Yep. When you tax sin, you become the pimp.

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