2011 19 DK 1 en

THE FOLKETING HANSARD A
THE FOLKETING
Draft Act No L 111
The Folketing 2010-11
1. ------IND- 2011 0019 DK- EN- ------ 20110215 --- --- PROJET Proposed on 19 January 2011 by the Minister for Taxation (Troels Lund Poulsen)
Draft
of
Proposal for the Act on a Tax on Saturated Fat in Specific Food (The Fat Tax Act).
Chapter 1 Tax on saturated fats Taxable food Article 1. A tax is to be paid to the treasury on the weight of saturated fat in the following food identified by the EU Combined Nomenclature code, if the saturated fat content in the food exceeds 2.3 % by weight: 1) Meat, cf. however Annex 1. 2) Dairy products under codes 0401- 0406. 3) Animal fat under codes 1501-1504 and 1516, which are melted out or are extracted in other ways 4) Edible oils and fats under codes 1507 -1516, 5) Margarine and other food under code 1517, 6) Spreadable blended spreads under position 2106. 7) Other food which, based on an overall evaluation of the nature of the food, its use and the way it is marketed, can be considered to be a substitute for or imitation of the goods specified in points 1 - 6. Tax rate Article 2. The tax is DKK 16 per kg of saturated fat in the food. Taxable parties Article 3. The obligation to pay tax is incumbent upon those who commercially, cf. however Article 4(6), 1) produce the food in this country, 2) receive the food into this country from another EU country, 3) import food into the country from a country outside the EU or from areas located in the EU which are not included in the EUs fiscal territory, or 4) sell food from another EU country in such a way that the goods are directly or indirectly sent or are transported by the seller or on behalf of the seller to a non-commercial purchaser in this country (distance selling), where the entity is registered in accordance with the VAT Acts Article 47(2). Paragraph 2. The obligation to pay tax is incumbent in other cases than those stipulated in Article 3(1)(4) upon a non-commercial consignee who receives the food in this country from another EU country. The obligation to pay tax is furthermore incumbent upon a non-commercial consignee who imports the food into the country from a country outside of the EU or from areas located in the EU which are not included in the EUs fiscal territory. Registration Article 4. An entity which is taxable in accordance with Article 3(1)(1) is to be registered as warehousekeeper with the Danish Customs and Tax Administration, cf. however Paragraph 6. Registration is to take place before the taxable activity has begun. Paragraph 2. An entity which produces food on which tax is to be paid tax in accordance with Article 1 for export or food which is unfit for human consumption, can be registered with the Danish Customs and Tax Administration as a warehousekeeper for this part of production, cf. however Paragraph 6. The proportion of the production which the entity can be registered as warehousekeeper for is set based on the entitys production for export or of food other than food fit for human consumption, in the previous year. Registration is to, in this case, be completed before the activity has begun. Paragraph 3. An entity, which is taxable in accordance with Article 3(1)(2) or (3) is to be registered with the Danish Customs and Tax Administration as consignee, cf. however Paragraph 6. Registration is to take place before transport of the food from the foreign country has begun. The entity can, however, be registered as warehousekeeper if it solely operates intermediary trade in taxable goods with other entities registered in accordance with this Act. Registration is to, in this case, take place before the taxable activity has begun. An entity which is already registered in accordance
AN010596 Skattemin., j.nr. 2010-231-0038
THE FOLKETING
Draft Act No L 111
The Folketing 2010-11 Paragraph 4. Nutrition labelling can be used for the other food specified in Article 1 to determine the tax base, if the food has nutrition labelling. The taxable party can also use publically available food information which sets average standards for the levels of saturated fat in specific food to determine the base amount on which tax is to be paid. Taxable parties can furthermore determine the base amount on which tax is to be paid upon a technical analysis of the specific food. Paragraph 5. Where taxable parties are unable to document the weight of saturated fat using the methods specified in Paragraph 4, tax is to be paid based on the total amount of both saturated and unsaturated fat in the food or, if this also cannot be provided, it is to be paid based on the food products net weight. Paragraph 6. The Minister for Taxation can set average standards for the amount of saturated fat in specific food, which entities can use to determine the base amount on which tax is to be paid. Determination of the base amount on which tax is to be paid Article 7. An entity which is registered in accordance with Article 4(1) or Article 4(3)(3) is to determine the base amount on which tax is to be paid for a tax period based on the taxable food, cf. Article 1, which has been supplied from the entity in the tax period. An entity which is food taxable as specified in Article 1(1) can however choose to determine the base amount on which tax is to be paid for a tax period on the animals slaughtered and make deductions, cf. Article 6(3)(2). Paragraph 2. An entity which is registered in accordance with Article 4(2) is to determine the base amount on which tax is to be paid for a tax period based on the taxable food cf. Article 1 which is used in the production of food for export or food which is unfit for human consumption which is supplied by the entity in the tax period. Paragraph 3. An entity which is registered in accordance with Article 4(3)(1) is to determine the base amount on which tax is to be paid for a tax period based upon the taxable food which is received or imported from a foreign country in the tax period. Paragraph 4. An entity which is registered in accordance with Article 4(4) is to determine the base amount on which tax is to be paid for a tax period based on the taxable food which the entity has sold by distance selling into this country in the tax period. Paragraph 5. An entitys own consumption of taxable food is to be considered to be equivalent to the supply of taxable food. Chapter 2 Financial levy
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with Paragraph 1 is not to also be registered as taxable in accordance with Article 3(1)(2) or (3). Paragraph 4. An entity which is taxable in accordance with Article 3(1)(4) is to be registered with the Danish Customs and Tax Administration for remote sales, cf. however Paragraph 6. Registration is to take place before transport of the food from the foreign country has begun. Paragraph 5. A certificate of registration is issued to registered entities. Paragraph 6. Entities which have an annual sales of taxable goods with an exclusive tax of DKK 50 000 or less are not to be registered or pay tax. Article 5. An entity which is registered in accordance with Article 4(1) or (2), can produce, process, store, including items received from other warehousekeepers, receive or import from other countries, and supply to other warehousekeepers or to foreign countries taxable food without the tax being required to be paid. Paragraph 2. An entity which is taxable in accordance with Article 4(3)(3) can receive from other warehousekeepers or receive or import taxable food from other countries without the tax being required to be paid, if the food products are intended for resale to entities registered in accordance with this Act. Paragraph 3. An entity which is registered in accordance with Article 4(3)(1), can receive or import taxable goods from other countries without the tax being required to be paid on receipt or import. Base amount on which tax is to be paid Article 6. The base amount on which tax is to be paid is the weight of saturated fat in the food, cf. however Paragraph 3 - 5. Paragraph 2. The taxable party is to be able to document the weight of saturated fat in the food. Paragraph 3. The standard rates for the taxable food specified in Article 1(1) are to be used as specified in Annex 1 of the Act for setting the base amount on which tax is to be paid where these are supplied as cuts of meat. Where a half animal, quarter animal or sixth animal is supplied, the taxable parties deduct 27.5 % of the base amount on which tax is to be paid for pork and 25 % of the base amount on which tax is to be paid for other animals. The taxable parties can however choose to determine the base amount on which tax is to be paid upon the cuts which are supplied prepackaged to the retail trade at the cut level, such that tax is paid on the saturated fat content in the cut. The amount of saturated fat in the cut can be calculated based on publically available food information or based on specific documentation of the saturated fat content in the specific cut.
Skattemin., j.nr. 2010-231-0038
THE FOLKETING
Draft Act No L 111 Food on which financial levies are paid
The Folketing 2010-11 Paragraph 3. An entity which is required to pay financial levies in accordance with Article 9(1)(3) is to register its distance selling with the Danish Customs and Tax Administration, cf. however Paragraph 4. Registration is to take place before transport of the food from the foreign country has begun. Paragraph 4. Article 4(5) and (6) are to similarly apply. Article 11. An entity which is registered as consignee in accordance with Article 10(1) can receive or import food on which a financial levy is required to be paid from other countries without the financial levy being required to be paid on receipt or import. Paragraph 2. An entity which is registered as warehousekeeper in accordance with Article 10(2) can produce, process, store, receive from other warehousekeepers, receive or import from foreign countries, and supply to other registered entities or to foreign countries, food on which financial levies are to be paid, if these are intended to be used in the production of food for export or of food which is unfit for human consumption, without the financial levy being required to be paid. Base amount on which tax is to be paid Article 12. The base amount on which tax is to be paid is the weight of saturated fat in food constituents on which a financial levy is to be paid which originates from the taxable food specified in Article 1, which is used in the production of food which is received, imported or sold by distance selling, cf. however Paragraph 2(2). Paragraph 2. Taxable parties are to be able to document the weight of saturated fat in the constituents used in the production of the food and are, on request, to present a declaration of this from the producer. For constituents on which a financial levy is required to be paid as specified in Article 1(1), the base amount on which tax is to be paid is to be determined using the average rates in Annex 1. The producer can, by the issue of a producer declaration and for other constituents on which financial levies are to be paid, use publically available food information which sets average standards for the amount of saturated fat in specific food, and prepare a declaration which can be used to determine the base amount on which tax is to be paid on constituents on which a financial levy is to be paid, which is used in the production of the food. Paragraph 3. If the taxable party can not present the specified producer declaration for other constituents than food specified in Article 1(1), a financial levy is to be paid based on the total amount of both saturated and unsaturated fat in the food or, if this also cannot be provided, it is to be paid based on the food products net weight. Determination of the base amount on which tax is to be paid
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Article 8. A tax is to be paid to the treasury on the constituents used in the production of food, where these constituents originate from the taxable food specified in Article 1 and where such food is received, imported or is sold by distance selling in this country. Paragraph 2. The tax is DKK 16 per kg of saturated fat in the taxable constituents used in the production of the food. Persons liable to pay financial levies Article 9. The obligation to pay a financial levy is incumbent upon those who commercially, 1) receive the food in this country from another EU country, 2) import the food into the country from a country outside the EU or from areas located in the EU which are not included in the EUs fiscal territory, or 3) sell food from another EU country in such a way that goods are directly or indirectly sent or transported by the seller or on the sellers behalf to a non-commercial purchaser in this country (distance selling), when the entity is registered in accordance with the VAT Acts Article 47(2). Paragraph 2. The obligation to pay a financial levy is borne in other cases than Article 9(1)(3) by a noncommercial consignee who receives the food in this country from another EU country. The obligation to pay tax is furthermore borne by a non-commercial consignee who imports the food into the country from a country outside of the EU or from areas located in the EU which are not included by EUs fiscal territory. Registration Article 10. An entity which is required to pay financial levies in accordance with Article 9(1)(1) or (2) is to be registered with the Danish Customs and Tax Administration as consignee, cf. however Paragraph 4. Registration is to take place before transport of the food from the foreign country has begun. Paragraph 2. An entity which produces food on which a financial levy is to be paid in accordance with Article 8 for export or which is unfit for human consumption can be registered with the Danish Customs and Tax Administration as a warehousekeeper for this part of production, cf. however Paragraph 4. The proportion of the production which the entity can be registered as warehousekeeper for is set based on the entitys production for export or of food other than food fit for human consumption, in the previous year. Registration is to take place before the taxable activity has begun.
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THE FOLKETING
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The Folketing 2010-11 Deductions and refunds Article 17. An entity registered as warehousekeeper can deduct from the base amount on which tax is to be paid, calculated in accordance with Articles 7 or 13 1) taxable food which is supplied to another registered warehousekeeper, 2) taxable food which is supplied to foreign countries or which is unfit for human consumption, 3) taxable food which is tax exempt in accordance with Article 18, 4) taxable food which, while being held by a warehousekeeper or in transit to or from the warehousekeeper, is lost by burglary, fire, shipwreck or breakage, 5) taxable food which, while held by a warehousekeeper or in transit to or from a warehousekeeper, is damaged, spoilt or made unusable due to other grounds, and 6) taxable food which is returned to the entity where the purchaser refunds the price of the food including the tax. Paragraph 2. An entity can apply for a refund on the tax paid on taxable food, cf. Articles 1 or 8, which is supplied to foreign countries or is used in the production of food other than food fit for human consumption. Paragraph 3. A condition for refunds in accordance with Paragraph 2 is, 1) that the entity can present the required documentation, 2) that the taxable food for which a refund has been applied, originates from a taxable entity, and 3) that the entity is in possession of an invoice for the food or the constituents used in the production of the food. Paragraph 4. The Danish Customs and Tax Administration can set more detailed regulations on deductions and refunds. Deliveries to diplomats and similar Article 18. Food supplied to diplomatic representations, international institutions etc., and the persons associated with these, as stipulated in Article 4 of the Customs Act, are exempted from the tax in accordance with this Act. Paragraph 2. The Danish Customs and Tax Administration can set more detailed regulations on tax exemptions. Invoicing and accounting regulations Article 19. Registered entities are, as a minimum, to maintain accounts of raw materials and taxable food, the addition of bonded food, transfer of bonded food to other entities registered in accordance with Article 4(1), or (2), Article 4(3)(3) or Article 10(2), delivery of taxable food and own consumption of taxable food.
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Article 13. An entity which is registered in accordance with Article 10(1) is to determine the base amount on which tax is to be paid for a tax period based on the weight of saturated fat used in the production of the food on which a financial levy is to be paid, which the entity has received or imported from foreign countries in the tax period. Paragraph 2. An entity which is registered in accordance with Article 10(2) is to determine the base amount on which tax is to be paid for a tax period based on the weight of saturated fat used in the production of the food on which a financial levy is to be paid which is delivered from the entity in the tax period. Paragraph 3. An entity which is registered in accordance with Article 10(3) is to determine the base amount on which tax is to be paid for a tax period based on the weight of saturated fat used in the production of the food on which a financial levy is to be paid, which the entity has sold by distance selling into this country in the tax period. Paragraph 4. An entitys own consumption of food on which a financial levy is required to be paid is to be considered to be equivalent to the supply of taxable food. Chapter 3 Common regulations Declaration and settlement of taxes and financial levies Article 14. The tax period is the month. Paragraph 2. Registered entities are, after the end of each tax period, to declare and pay tax, cf. Articles 2 and 3 of the Act on Collection of Taxes and Charges etc. (the Collection Act). The Danish Customs and Tax Administration can set more detailed regulations on this. Paragraph 3. Articles 4 - 8 of the Act on Collection of Taxes and Charges etc. (the Collection Act) similarly apply to deficient, incorrect or late declaration, payment or acknowledgement in the accounts. Article 15. For non-commercial parties who receive taxable food from another EU country, cf. Article 3(2)(1) or Article 9(2)(1), Article 9(2) and (4) of the Act on Collection of Taxes and Charges etc. (the Collection Act) similarly applies. Article 16. For non-commercial parties that import taxable food into the country from a country outside the EU or from areas located in the EU which are not included in the EUs fiscal territory, cf. Article 3(2)(2) or Article 9(2)(2). Chapter 4 in the Customs Act similarly applies. Paragraph 2. There is a tax exemption for imported food which applies to the same extent and under similar conditions as the tax exemption set in accordance with the VAT Acts Article 36(1)(1)-(3).
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The Folketing 2010-11 Administration with all required information relating to the delivery of goods to taxable entities. Paragraph 5. Entities should, on request, provide the Danish Customs and Tax Administration with information on the entitys purchases of taxable food. Paragraph 6. The Danish Customs and Tax Administration is entitled to carry out inspections of taxable food in transit, when the products are commercially sold from other countries or commercially transported to entities other than registered entities. Paragraph 7. The Danish Customs and Tax Administration is similarly to be provided with electronic access to information specified in Paragraph 1 that is electronically registered. Paragraph 8. The Police provide the Danish Customs and Tax Administration with assistance with the implementation of inspections carried out in accordance with this provision. The Minister for Justice can, after consulting with the Minister of Taxation, set more detailed regulations with respect to this. Article 21. Public authorities are, on request, to provide the Danish Customs and Tax Administration with all information used in the registration and control of entities which are taxable in accordance with this Act. Penalty Article 22. A fine is imposed on anyone who knowingly or recklessly: 1) submits incorrect or misleading information or conceals information used in tax inspections, 2) violates Article 4(1), Article 4(3)(1) or (2), Article 4(4), Article 10(1) or (3), Article 14(2)(1) Article 15, Article 16, Article 19(1)(3) and (5)(7) or Article 20(1)-(7) or 3) transfers, obtains or acquires goods on which tax has not been paid and which should have been paid in accordance with the Act or attempts to carry out this. Paragraph 2. Penalties in the form of fines can be set in regulations which are issued in pursuance of the Act, for those who intentionally or with gross negligence violate the provisions of the regulations. Paragraph 3. Those who commit one of the specified violations with intention of evading paying required tax to the treasury are penalised by fines or imprisonment of up to 1 year and 6 months, unless a higher penalty is incurred by Article 289 of The Penal Code. Paragraph 4. Liability to punishment may be imposed on entities etc. (legal entities) in accordance with the rules of Chapter 5 of the Penal Code. Article 23. Articles 18-19 of the Act on Collection of Taxes and Charges etc. (the Tax Collection Act) similarly apply to cases of violation of this Act.
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Paragraph 2. The entitys accounting materials are to be stored at the entity, unless it can be made available to the Danish Customs and Tax Administration within 5 working days. Paragraph 3. Accounting materials, including invoices, invoice copies, delivery notes, and statements, are to be stored for 5 years after the end of the financial year. Retail entities cash till receipt rolls and similar internal vouchers are however only required to be stored for 1 year from the point in time of the signature of the annual accounts. Paragraph 4. The Minister for Taxation can set more detailed regulations on the accounts of registered entities. Where electronic invoices and account documents are used, the equivalent invoicing and accounting regulations similarly apply. Paragraph 5. The entities are to keep the store of bonded food separated from stores of taxable food, unless the entity has received permission from the Danish Customs and Tax Administration for other arrangements. Paragraph 6. Registered entities are to issue an invoice in the event of sale of taxable food, cf. Articles 1 or 8, to another registered entity. The invoice is to include the following information: sequential invoice number, invoice date, the sellers name, organisation number and address, the purchasers name and address, and the nature, volume, and price of the delivery. Paragraph 7. Registered entities which supply food on which tax is to be paid in accordance with Article 1 or Article 8, to an entity which is registered in accordance with Article 4(1) or (2), Article 4(3)(3) or Article 10(2) is, at the same time as delivery of the food, to inform the receiving entity in writing of the base amount on which tax is to be paid for the relevant food. Inspection Article 20. The Danish Customs and Tax Administration has, if it is believed to be necessary, at all times and on the presentation of appropriate identification and without a court order, the right to carry out inspections of entities included by the Act and the entities referred to in Paragraphs 5-7 and to inspect the entities stock, books of accounts, other accounting materials and correspondence etc.. Paragraph 2. The entitys owners and persons employed in the entity are to provide the Danish Customs and Tax Administration with the required information and assistance when carrying out inspections. Paragraph 3. The materials specified in Paragraph 1 are, on request, to be handed over to or sent to the Danish Customs and Tax Administration. Paragraph 4. Suppliers of goods or of packaging for the production of food which is taxable in accordance with this Act are to, on request, provide the Danish Customs and Tax
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THE FOLKETING
Draft Act No L 111 Other regulations
The Folketing 2010-11 Paragraph 5. Entities that are required to register, cf. Articles 4 or 10, are to request registration with the Danish Customs and Tax Administration at the latest by 1 July 2011. Article 27. In the Act on the Collection of Taxes and Charges etc. (the Tax Collection Act), cf. Consolidation Act No 1402 of 7 December 2010, as amended by Article 5 in Act No 1560 of 21 December 2010, the following amendments have been made: 1. In Article 9(2)(1), list A, Nos 5-18 and 31 is amended to: list A, Nos 5-18, 31, and 35. 2. The following is inserted in Annex 1, List A as No 35: 35) The Act on a Tax on Saturated Fat in Specific Food (The Fat Tax Act). Article 28. In the Act on the tax on beer, wine, and fruit wine etc., cf. Consolidation Act No 890 of 17 August 2006, which was amended by Article 1 in Act No 626 of 11 June 2010 and last amended by Article 10 in Act No 722 of 25 June 2010, the following amendments have been made: 1. In Article 3(2)(2), 6.14, is amended to: 6.87. 2. In Article 3 C 15.00 is amended to: 14.27. Article 29. The act does not apply to the Faroe Islands and Greenland.
Article 24. Those who transfer, obtain, acquire or use taxable food on which tax has not been paid but which should have been paid in accordance with this Act, are to pay tax on the food. Article 25. Articles 11-13 of the Act on Collection of Taxes and Charges etc. (the Collection Act) on the provision of security similarly apply. Chapter 4 Transition and entry into force provisions Article 26. The Act comes into force on 1 July 2011. Paragraph 2. For entities registered in accordance with Article 4(1) or (2)(3)(3) or Article 10(2), the Act has effect on food which is supplied by the entity on 1 July 2011 or later. For entities registered in accordance with Article 4(3) (1) and 4(4), or Article 10(1) or (3), the Act has effect upon food which is received or imported from other countries or is sold by distance selling into this country on 1 July 2011 or later. Paragraph 3. The Act has effect upon food which is received or imported from other countries by noncommercial taxable parties who receive or import taxable food from other countries on 1 July 2011 or later, cf. Articles 15 and 16. Paragraph 4. Article 28 applies to goods which, after the Act enters into force, are supplied for consumption by registered entities, are declared for customs clearance or are imported.
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THE FOLKETING
Draft Act No L 111
Annex 1
Standard rates Product Meat Beef Pork Mutton and goat meat Horse, mule, donkey Chicken, poultry and wild fowl Duck and goose Turkey Rabbit and hare Other game Other meat 5.2 6.5 6 4 2.5 12.1 0 0 1.6 4.2 0.83 1.04 0.96 0.64 0.40 1.94 0.00 0.00 0.26 0.7 Saturated fat per 100 g Tax per kg
AN010596 Skattemin., j.nr. 2010-231-0038
THE FOLKETING
Draft Act No L 111
Comments on the Bill

General comments Contents
1. Introduction 2. Draft Acts purpose and background. The Prevention Commissions recommendation The government appointed a Prevention Commission in 2008 which, in April 2009, submitted a number of recommendations to strengthen the preventative initiative. 3. The Draft Acts elements 3.1. The fat tax 3.1.1. General 3.1.2. The taxable area 3.1.3. Setting of the base amount on which tax is to be paid 3.1.4. Registration 3.2. Financial levy 3.2.1. General 3.2.2. The taxable area 3.2.3. Setting of the base amount on which tax is to be paid 3.2.4. Registration 3.3. Common regulations 3.3.1. Declaration and settlement 3.3.2. Deductions and refunds 3.3.3. Invoicing and accounting regulations 3.3.4. Inspection 3.3.5. Penalties 3.3.6. Other regulations 3.4. Transition and entry into force provisions 3.5. Increase of the wine tax 3.5.1. Current legislation 3.5.2. The drafts content 4. Financial consequences for the public sector 5. Administrative consequences for the public sector 6. Financial consequences for the commercial sector 7. Administrative consequences for the commercial sector 8. Administrative consequences for the citizens 9. Environmental consequences 10. The relationship to EU Law 11. Authorities and organisations consulted 12. Summary form
AN010596 Skattemin., j.nr. 2010-231-0038
THE FOLKETING
Draft Act No L 111
1. Introduction The purpose of the Draft Act is to promote better diets and therefore improve the health of the population. This is achieved by reducing the intake of saturated fat through a tax of DKK 16 per kg of saturated fat in specific food, when the saturated fat content is more than 2.3 % by weight. Some food has a high saturated fat content while other food has a low saturated fat content. Dietary recommendations stipulate that fat should be a part of a daily diet and that it is healthier to consume fat consisting of unsaturated fatty acids than saturated fatty acids. Typical foods with a high saturated fat content are foods such as dairy products, meat products, fats and oils, while cereals, fruit, and vegetables have very low or no saturated fat. The Draft Act at the same time contributes to the financing of the lower tax on income from employment, cf. the Spring Package 2.0. and Service Inspection of the Spring Package. It is proposed that the Act comes into force on 1 July 2011. 2. Draft Acts purpose and background. The Prevention Commissions recommendation The government appointed a Prevention Commission in 2008 which, in April 2009, submitted a number of recommendations to strengthen the preventative initiative. The Commissions findings include that a high intake of saturated fat is associated with increased risks of cardiovascular illness. The Commission states that: a tax on saturated fat in dairy products and vegetable fats of DKK 20 per kg is estimated to be able to reduce the total consumption of saturated fat by around 3 % The Commissions calculations show that this tax increase only has a limited effect upon average lifetimes. A tax on saturated fat of DKK 20 per kg is expected to result in a net revenue gain for the state of DKK 1 billion and a significant administrative burden and increased costs for selected commercial activities. The Commission has furthermore assessed the
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opportunity for imposing a tax on saturated fat in meat. This tax is however considered to be very difficult and expensive to administer. The Commission recommends that: the proposed tax on saturated fat is expanded to include milk products. The tax is continuously indexed. The ability to overcome the administrative difficulties associated with introducing a tax on saturated fat in meat should be evaluated. The Spring Package 2.0 - Growth, climate, lower tax The government (The Venstre and Det Konservative Folkeparti political parties) and the Dansk Folkeparti political party entered into an agreement on 1 March 2009 on Spring Package 2.0. Refer to the introductory comments in Draft Act No L 195 on the amendment of the Income Tax Act and other legislation (the Spring Package 2.0 - Growth, climate, lower tax), which was presented on 22 April 2009 and which can be found on Folketingets web site www.folketinget.dk. This Draft Act concerns the part of the Spring Package 2.0 which relates to More healthy years of life. It is agreed in this to introduce a tax on saturated fat in dairy products (except milk) and oils of DKK 25 per kg It is stated in the agreement in general on this, that: tax on unhealthy products is to be used with great care, as Denmark is a part of an international economy. If the tax increases are too great, crossborder trade will increase and not the health of the population. Tax increases are to be tuned to crossborder trade considerations. ... Tax increases alone do not solve the problem of increased prevalence of these widespread diseases. The individual Dane must also make choices and take responsibility for their own health. Tax which is appropriately structured can promote development in the right direction and support a healthy lifestyle. Service Inspection of the Spring Package 2.0. Meat was originally not included in the base amount on which tax is to be paid, because it was considered that the fat tax could not be differentiated for the saturated fat content in individual cuts, without
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THE FOLKETING
Draft Act No L 111
the tax becoming very administratively arduous for the entities to handle. The EU Commission has, based on a dialogue with the Danish Ministry of Taxation, however pronounced that the omission of meat from the base amount on which tax is to be paid does not comply with the EUs state aid regulations. Meat is therefore included in the base amount on which tax is to be paid to secure the full health benefits of a fat tax and at the same time ensure that the tax is designed in accordance with EU regulations. The tax on meat is proposed to be designed as such that it, in principle, uses a set average rate for the amount of saturated fat in the individual animal species. Abattoirs can however choose to determine the tax based on the individual cut using publically available food information or specific measurements. Inclusion of meat in the base amount on which tax is to be paid results in a revenue increase of DKK 500 million a year. The Finance Act 2011 The Finance Act of 2011 stipulates that the tax on saturated fat is DKK 13 per kg, as this was based on the Draft Act distributed for consultation. The rate in this Draft Act is however raised to DKK 16 as a result of the amendments made to comply with the requests of industry organisations relating to the calculation of the fat tax on meat. In accordance with the Spring Package 2.0 and the Service Inspection of the Spring Package, the tax on saturated fat contributes DKK 1.5 billion to financing and it is therefore necessary to increase the rate. Adjustment of the wine tax The Service Inspection agreement furthermore states that: The parties furthermore agree to investigate the opportunities to increase the wine tax in isolation. A potential rise is to be adopted at the same time as the adoption of the tax on saturated fat and the revenue is to be used to relax the fat tax. It was proposed, after investigating the opportunities, that the break-even point for the wine tax should be changed such that the break-even point in class 2 is raised from 12 % to 13.5 % The fat tax and the wine tax therefore in total provide DKK 1.5 billion in financing a year at a tax rate of DKK 16 per kg of saturated fat in selected food.
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The contribution to financing of DKK 1.5 billion is inclusive of VAT and therefore contributes DKK 1.5 billion to the immediate income tax relief that was included in The Spring Package 2.0. The Danish Ministry of Taxations considerations There are many aspects that need to be taken into consideration in the design of a completely new tax. On the one hand, a tax on saturated fat should include a significant proportion of ordinary foodstuffs, to ensure this has the greatest effect on consumption. It should also be as simple as possible and ideally be as far back in the supply chain as possible, so the fewest number of entities as possible are subject to the administrative burdens associated with being registered, declaring, and settling tax. Measurement of the fat content in the most dairy products, fats, and oils is administratively relatively simple, as these products are largely standardised products. There can be small variations in the fat content and therefore in the saturated fat content - i.e. whether sunflowers used to produce a sunflower oil originate from a south facing field in Spain or from a field in Germany or whether dairy cattle have grazed outside in the summer and have eaten fresh grass or been kept inside in stalls in the winter and have eaten hay can have an effect upon fat contents. The voluntary nutritional labelling on food products or publically available food information can largely be used to determine the saturated fat content in the food. The measurement of the fat content in meat products is however more difficult. A slaughter animal is in general a standardised product. The fat content does however vary by breed, age, and rearing. Fat content also varies depending upon the individual cut of the animal and is affected by how much fat is cut away. It is therefore difficult to determine the precise saturated fat content in the many different cuts and a fat tax is therefore administratively more onerous to handle at the cut level than on the other food, as is proposed included by the tax. Slaughtered animals are furthermore not only parted into cuts at abattoirs, but also to a great extent in retail stores, i.e. at an independent butcher or a supermarket with its own butcher. Animals are usually slaughtered
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and parted into two halves at the abattoir and then each half is cut in three parts. These can be cut into smaller pieces for sale in retail stores either at the abattoir itself, in dedicated cut units, or by the local butcher or a supermarket butcher. It is therefore proposed that, to make the tax as administratively simple to handle as possible, that the tax on saturated fat in meat in principle is calculated based on set average rates for the saturated fat content per meat type. Average standard rates are therefore set in Annex 1 of the Act for the saturated fat content in the most common and industrialised meat types and for other meat, which is set as an average of the other meat types. Requests were however received during the Draft Act consultation to provide the option to settle the fat tax per cut, as the tax is differentiated by the saturated fat content in individual cuts. Such a scheme would be administratively arduous for the entities to handle. It is therefore proposed that this request is granted, but that it is voluntary to settle the fat tax at cut level. It is noted in association with this that even where an entity uses the average rate specified in the Annex for all cuts, that the entity itself decides which cuts it wishes to pass on the tax for when it sells parted meat to retail stores. Attention was drawn, in the consultation, that the publically available food information which is found in the Food Composition Databank (www.foodcomp.dk) can be used in determining the fat tax by saturated fat content in the individual cut. The Food Composition Databank does not however contain information on all cuts. As there are both standard cuts and cuts in accordance with specific customer requests, the entities also will need to settle the saturated fat content in the specific cut based on a specific measurement. It is furthermore proposed that a deduction of 27.5 % is given from the base amount on which tax is to be paid for pork and 25 % from the base amount on which tax is to be paid for other animals, when half, quarter or a sixth animal is sold. This is to accommodate the practice that smaller butchers and some supermarkets etc. purchase such larger pieces of meat to mature and cut the meat themselves. A deduction of 27.5/25 % is equivalent to the waste incurred at an abattoir, which cuts meat for retail
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stores, due to the cutting away of bones etc. The reason for the deduction differentiation is that the skin is not removed on pork. The abattoir can deduct this waste as an abattoir will be registered as a warehousekeeper and therefore determines tax on the saturated fat in the meat based on the meat supplied by the abattoir. This is a completely new tax. The Danish Ministry of Taxation will therefore continuously evaluate the tax and will consider making adjustments if any new regulations are implemented in other areas, for example in food legislation, which can ease the administrative burden associated with the determination of the base amount on which tax is to be paid or if the market for a food changes inappropriately due to the tax. Due to the significant uncertainty around the base amount on which tax is to be paid, the Danish Ministry of Taxation will similarly follow development in revenue with respect to any adjustments. 3. The Draft Acts elements 3.1. The fat tax 3.1.1. General It is proposed that there should be a tax on the saturated fat in meat, dairy products, and in animal and vegetable fat in the form of edible oils, butter, margarine, and similar if the food has a saturated fat content of more than 2.3 % by weight and if the entity has a sales of taxable food of more than DKK 50 000 exclusive tax. The tax is DKK 16 per kg of saturated fat in the food. Meat, dairy products, and fats/oils typically have a high saturated fat content while cereals, fish, fruit, and vegetables have a very low or no saturated fat. It is proposed that de minimis thresholds are set for food that is included by the tax, to minimise the number of low fat foods which are included by the tax and to at the same time take into account that nutritional recommendations state that a part of the recommended daily intake originates from fat and ideally unsaturated fat.
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Food with a saturated fat content of 2.3 % by weight or less will therefore not be included by the tax. A saturated fat content of 2.3 % by weight or less results in lean dairy products such as A38 and Minimlk not being included and higher fat dairy products such as cream, crme fraiche, cheese, etc. being included by the tax. The exclusion of milk with a fat content of up to 2.3 % saturated fat from the tax fat is in alignment with the dietary recommendations that infants and small children should drink milk. Full cream milk with 3.5 % fat is recommended up until 1 year of age, semi-skimmed milk from 1-3 years of age, and low fat milk products such as Minimlk are recommended for children above 3 years of age. The other product groups which are included by the tax, which includes oils and fats such as butter and margarine, normally lie above the de minimis threshold. The de minimis threshold does not immediately apply to meat if the base amount on which tax is to be paid is calculated using the average rates in Annex 1. The rates in Annex 1 take into account that some cuts contain very high levels of saturated fat while others contain less fat. Tax is to be paid even where the rate is below 2.3 % where tax is determined and settled in accordance with Annex 1. There are two types of meat where all cuts are below the de minimis threshold of 2.3 %. The rates for these are therefore set to zero and they are therefore not included by the tax. If the entity instead chooses to settle the base amount on which tax is to be paid at cut level, such that the fat content varies with the cut, then there will be cuts of meat which fall below the de minimis threshold and there will be cuts which are above the average rate specified in Annex 1. The taxable entity can choose to settle the base amount on which tax is to be paid for the other product groups based on a voluntary nutrition labelling on the taxable food, for example because the specific food contains less fat/saturated fat than similar food. Minor variations will not affect the base amount on which tax is to be paid, as the regulations on food labelling permit a specific degree of content variation. Whether cattle have grazed in the summer outdoors and eaten grass or been kept indoors in the winter and eaten hay
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is therefore not of significance, provided the regulations for the preparation of nutritional labelling are complied with. The taxable entity can also use publically available food information and the average standards for saturated fat content in some food. Variations will similarly also not affect the base amount on which tax is to be paid where this is used. Publically available food information is considered to be the information contained in the Food Composition Databank www.foodcomp.dk. For example, the base amount on which tax is to be paid is to be set based on the saturated fat content in sunflower oil, as specified in the Food Composition Databank. Animal fat originating from animals are included in the tax as an independent food group, so that this group does not gain a benefit by using the lower average standard rate for meat. There is therefore no incentive to replace substitutable products such as vegetable fat, which has a higher unsaturated fat content, with animal fat with a high saturated fat content through the lower taxation that would be achieved by taxing this as meat. It is also proposed that the tax is to include margarine and similar processed food. These are standardised products which to a great extent replace dairy products. Edible oils consist almost exclusively of vegetable or animal fat. It is therefore furthermore proposed that the tax also includes edible oils. The path of a food from producer to consumer can pass through several stages. The number of retailers which sell directly to consumers is significantly greater than the number of producers or importers of taxable food. It is therefore proposed, to simplify administration, that the tax is imposed on producers/imports rather than retailers. A consequence of this is, for example, that a baker that uses cheese and margarine in the production of a cheesecake will not be required to be registered, declare, and settle tax on the saturated fat in the cake, as tax on the cheese and margarine has already been paid on the delivery from the producer. This means also there is no deduction or refund on the tax on parts of the cheese or margarine which are discarded as
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waste in production. The amount of saturated fat in the cheese or margarine changes during the production of the cheesecake, such that the cake has a higher or lower proportion of saturated fat than that added to the cake. There are no deductions or refunds for this, but there is similarly no additional tax on the completed cheesecake if the fat content is higher. Another example is the deep-fat frying of fried potato chips. Taxable oil is used in production, which is discarded after production as an oil residue. The tax on the used, discarded oil cannot be deducted or be refunded. Entities which use the taxable food specified in Article 1 in the production of other food, such as liver pt, chips, biscuits, etc. also in principle purchase the ingredients with tax. A special regulation is however set for entities which produce food for export or produce items other than food fit for human consumption (non-food) and which can therefore deduct the tax in the tax settlement, such that the liquidity of these entities is not required to bear tax for this part of production (the opportunity for a partial warehousekeeper registration). 3.1.2. The taxable area In accordance with the proposal, the tax will therefore include the saturated fat in a large part of our basic foodstuffs, except food with a low saturated fat content. It is proposed that the taxable food is, to the greatest extent possible, identified using the delimitations used in the EUs Combined Nomenclature, cf. Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff. The Combined Nomenclature is an internationally recognised method for identifying goods for resale. The commercial sector is familiar with the nomenclature, as commercial parties use the nomenclature in association with the continuous reporting of trade in products for statistical purposes. The large range of product types that the Nomenclature covers means that identification using the nomenclature is relatively general. The benefits achieved from using the nomenclature, which is a generally well-known identification method, are considered to outweigh this drawback.
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It is proposed, based on this, that the tax is imposed on: Dairy products under codes 0401- 0406. Animal fat which is melted off or extracted in other ways, under codes 1501-1504 and 1516. Edible oils under codes 1507-1516. Margarine and other food under code 1517 Spreadable blended spreads under position 2106. And a collective regulation for other food which contains more than 2.3 % saturated fat and which is comparable with the above taxable food. The nomenclature is not used for meat, as it specifies some, but not all cuts, and therefore can create doubt with respect to the setting of the base amount on which tax is to be paid in relation to Annex 1. Meat includes meat from the animals specified in Annex 1 of this Act. Meat means the raw meat which is obtained when an abattoir slaughters and parts complete animals, irrespective of whether the abattoir cuts the animal into two halves or several parts. If additional preparation of the meat such as boiling, salting, etc. is carried out, tax is to be based upon the raw meat, as the meat changes nature to, for example, a ham, rolled meat sausage, etc. which affects the saturated fat content. The collective regulation includes food which has a saturated fat content of more than 2.3 % by weight and which can replace the food specified in Article 1(1) (6). This type of provision is found in the Chocolate and Sugar Tax Act and has the purpose of ensuring that comparable products, which can substitute taxable food, are also included by the tax, so that comparable products are similarly taxed. Undistorted competition is therefore ensured. The collective regulation will, for example, include pizza topping. This is not a dairy product (cheese), but is marketed as grated cheese, is used as grated cheese, and therefore can be considered to be a substitute product for grated cheese. The tax only includes food, which means food used for human consumption. In other words, food used for other purposes such as animal feed or as a fuel for vehicles, etc. is exempted from the tax, as the purpose of the tax is to promote better diets. A refund cannot be granted from food which has been used for its
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primary purpose, specifically the production of food, where production waste (for example the oil from deep-fat frying) is subsequently used for other purposes. Additives are also not included by the tax. An additive is not used as an independent food and is in Regulation (EC) No 1333/2008 of the European Parliament and of the Council on food additives defined in that it shall mean any substance not normally consumed as a food in itself and not normally used as a characteristic ingredient of food, whether or not it has nutritive value, the intentional addition of which it is food for a technological purpose in the manufacture, processing, preparation, treatment, packaging, transport or storage of such food results, or may be reasonably expected to result in it or its byproducts becoming directly or indirectly a component of such foods. Food supplements which consist of oil bound vitamins, minerals, and similar and medicine which would be included as a taxable foods are also not included by the tax as such products cannot be considered to represent independent food. 3.1.3. Setting of the base amount on which tax is to be paid Taxable parties are to be able to document the weight of saturated fat in the food. Taxable parties are, in principle, to use the average rate for saturated fat for the different meat types set in Annex 1 for meat. The taxable parties can however choose to determine the base amount on which tax is to be paid on cut level, where this relates to cut meat which is supplied pre-packaged to retail stores. Taxable parties who choose to settle the base amount on which tax is to be paid at cut level can set the base amount on which tax is to be paid in two ways. Taxable parties can choose to use the publically available food information available in the Food Composition Databank on raw and unprocessed meat or carry out a specific measurement of the fat content in the cut. If an abattoir does not supply cut meat, but only half, quarter or sixth animals, the taxable parties are to deduct 27.5 % of the base amount on which tax is to be paid for pork and 25 % of the base amount on which tax is to be paid for other meat types. The meat then
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undergoes additional cutting before it is sold to consumers by the local butcher, supermarket, meat processor or other. Taxable parties are to base tax on food other than meat on the nutrition labelling, if the food is marked with such. Nutrition labelling is currently voluntary. The EU is currently working on a compulsory standardised declaration, but adoption and implementation of this will take a few years. More and more food is, based on societys increased focus on food, however voluntarily provided with nutrition labelling. For example, labelling schemes and consumers interest in healthy food producers and importers provides an incentive to declare the nutritional content on food products. Taxable parties can also determine saturated fat content based on publically available food information, which sets average standards for a number of products i.e. edible oils, butter, margarine, cream, etc. Publically available food information means the standards which are found in the Food Composition Databank www.foodcomp.dk. Taxable parties can, however, also choose to set the base amount on which tax is to be paid for other food than meat based on a technical analysis of the food. If the base amount on which tax is to be paid cannot be set using one of the above methods, tax is to be paid based on the foods total fat content or ultimately on the products net weight. The last method stated above for setting the base amount on which tax is to be paid is a recourse regulation, which is to ensure that entities do not speculate in using any favourable recourse regulation, but attempt to determine the real base amount on which tax is to be paid in the food. The recourse regulation does not apply to meat, as tax is based on the average rates set in Annex 1 and the base amount on which tax is to be paid can always be set using the Annex. The Minister for Taxation is furthermore authorised to set average standards for saturated fat contents in some food, which the taxable parties can choose to use. Importers of food specified in Article 1 will be able to use these average standards where The Minister for Taxation utilises this authorisation. The same applies to food included by Article 8, as the standards
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can be used to set the base amount on which tax is to be paid on the taxable constituents used in the production of the food. Table 1 below shows examples of saturated fat content in different taxable products, based on information included in the Food Composition Databank. The actual saturated fat content in the different cuts and the average saturated fat content in
the whole slaughtered animal are shown for meat. Expected consumer price rises resulting from the tax are also shown. It is assumed that the tax is passed on in full where the calculation of the tax on meat uses the average saturated fat content. It should however be noted that even where the tax is determined using average saturated fat contents, that the abattoir, etc. will be able to distribute the tax freely, such that fat meat can incur higher tax than the lean meat.
Table 1. Examples of expected consumer price rises on selected food Saturated Size Pricing Tax fat per 100 example g Gram DKK
Whipping cream 24.8 250 ml Crme fraiche 12 500 g Butter (Danish) 51.8 250 g Butter (imported) 51.8 250 g Spreadable blended 39.5 250 g spreads, branded Spreadable blended 39.5 250 g 9.95 spreads Margarine 60 % 18.0 400 g 6.00 Corn oil 11.3 1 litre 15.00 Olive oil 13.0 1 litre 38.95 Sunflower oil 10.2 1litre 12.95 Rape oil 6.4 1 litre 9.95 Cheese 45 + 16.7 500 g 34.40 Cheese 30 + 10.4 500 g 36.80 Cream Havarti 60+ 24.7 400 g 19.95 Pork fat 41.5 500 g 11.95 Meat in accordance with actual saturated fat content in the relevant cut Chicken, tenderloin 1.0 1 000 g 59.97 Chicken, whole 3.4 1 000 g 20.36 Pork, minced, 15 % fat 5.5 1 000 g 37.90 Pork, minced, 3-7 % fat Mettwurst Pork side Beef, minced, 22 % fat 2.6 4.4 6.8 10.1 1 000 g 1 000 g 1 000 g 1 000 g 60.00 42.86 49.90 30.00
New price including tax and VAT DKK DKK 8.50 1.0 9.7 15.95 1.0 17.2 15.50 2.1 18.1 7.95 2.1 10.5 13.95 1.6 15.9 1.6 1.2 1.8 2.1 1.6 1.0 1.3 0.8 1.6 3.3 0 0.5 0.9 0.4 0.7 1.1 1.6 11.9 7.4 17.3 41.6 15.0 11.2 36.1 37.8 21.9 16.1 59.97 21.0 39.0 60.5 43.7 51.3 32.0
Consumer price rise in % % 14.6 7.5 16.7 32.6 14.2 19.8 24.0 15.1 6.7 15.8 12.9 4.9 2.8 9.9 34.7 0 3.3 2.9 0.9 2.1 2.7 6.7
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Beef, minced, 15 % fat Beef, minced 7 %. fat
6.9 3.2
1 000 g 1 000 g
53.90 79.90
1.1 0.5
55.3 80.5 201.7 260.4 60.5 20.9 39.2 61.3 44.2 51.2 31.0 54.9 80.9 200.9 260.9
2.6 0.8 0.9 0.2 0.8 2.5 3.4 2.2 3.0 2.6 3.5 1.9 1.3 0.5 0.4
Entrecote 9.0 1 000 g 199.88 1.4 Undercut of sirloin 2.7 1 000 g 259.90 0.4 Meat in accordance with the average saturated fat content in the relevant animal species Chicken, tenderloin 2.5 1 000 g 59.97 0.4 Chicken, whole 2.5 1 000 g 20.36 0.4 Pork, minced, 15 % fat 6.5 1 000 g 37.90 1.0 Pork, minced, 3-7 % fat Mettwurst Pork side Beef, minced, 22 % fat Beef, minced, 15 % fat Beef, minced 7 %. fat Entrecote Undercut of sirloin 6.5 6.5 6.5 5.2 5.2 5.2 5.2 5.2 1 000 g 1 000 g 1 000 g 1 000 g 1 000 g 1 000 g 1 000 g 1 000 g 60.00 42.86 49.90 30.00 53.90 79.90 199.88 259.90 1.0 1.0 1.0 0.8 0.8 0.8 0.8 0.8
3.1.4. Registration Taxable entities are to be registered before the taxable activity has begun or, if this relates to import or distance selling, before transport of the food has begun. It is proposed that producers, importers, intermediaries, and distance sellers of the taxable food specified in Article 1 which only have small levels of sales of these foods are exempted from the tax. It is, for example, not found to be appropriate that farm sales of home produced goats cheese or the sale of homemade fat from a sandwich restaurant or the import of a very small niche product should be included by the tax. It is therefore proposed that there should be a registration threshold such that small entities are not included by the tax. Entities which have an annual sales of taxable goods exclusive tax of DKK 50 000 or less are not required to be registered or pay tax. The registration threshold therefore is in line with the amounts used in the VAT Tax Act, entities with annual VAT taxable sales of DKK 50 000 or less not being required to be VAT registered. Entities with sales that exceed the registration threshold are to be registered and pay tax on sales from the first DKK.
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Entities that are required to register can either be registered as warehousekeepers, consignees or for their distance selling. Entities that carry out distance selling are only required to be registered for the distance selling if registered in accordance with the VAT Tax Act Article 47(2), cf. this Acts Article 48(3), which means that it has a total delivery by distance selling of more than DKK 280 000. An entities registration status also depends on which type of activity is operated and registration determines when the tax is to be settled. The Draft Act follows the general registration regulations in excise duty legislation. This means that for entities which produce the taxable food specified in Article 1, it is noted that a production entity which is registered as warehousekeeper that furthermore imports taxable food specified in Article 1, is not to also be registered as a consignee. If the production entity however imports food on which financial levies are required to be paid cf. Article 8, then the entity is to also be registered as consignee of food on which financial levies are required to be paid. A warehousekeeper can therefore produce, process, store, receive from other warehousekeepers, receive or
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import food from other countries, and supply food to other warehousekeepers or to foreign countries without paying this tax. The tax is therefore paid when the food is supplied from the entity to an entity that is not registered in accordance with this Act, a registered consignee, a non-commercial party or is used for own consumption. The tax is to therefore be paid when, for example, an abattoir which has its own retail store supplies meat to the retail store for sale to consumers or where meat is sold to abattoir employees. It is finally proposed that entities which operate intermediary trade in taxable food can also be registered as warehousekeepers if the entity exclusively sells food onwards to other registered entities. Some entities purchase taxable food for use in the production of food for purposes other than human consumption, so-called non-food production, such as animal feed or for the production of food for export. It is proposed that these entities can partially register as a warehousekeeper for the part of their production which is exported or non-food production, to reduce the burden that this places on these entities liquidity, as these entities can receive a refund for the tax paid on export out of the country or delivery of non-food products. It is noted that the warehousekeeper registration of entities that also produce food for the Danish domestic market does not apply to the domestic market part of production. These entities are to use taxable food for this part of their production when they produce food, which is therefore equivalent to the practice for entities that do not export or produce non-food. This ensures that a distortion of competition does not occur that benefits entities with export/non-food production. This means that entities that produce sausages for both export and the domestic market are to be registered as warehousekeepers for the part of the production which is exported. It can be difficult to know, at the point in time of purchase of the taxable food, what the actual use of the purchased food will be. The proportion of an entitys production that is exported is therefore set based on the exports of the previous year. If the entity, in the previous year, had for example exported 70 % of its total production, it could be granted a partial warehousekeeper
registration and could purchase 70 % of the taxable food specified in Article 1 without tax. The tax is calculated based on the weight of saturated fat in the produced and delivered food. Registered warehousekeepers therefore are not required to pay tax on any waste. For example, a producer of margarine that uses edible oil in the production of margarine only pays tax on the amount of saturated fat used in the produced margarine and does not pay tax on any edible oil which is discarded as waste during production. Entities which commercially receive or import the taxable food specified in Article 1 are registered as consignees. A registered consignee can receive taxable products without being required to pay tax on receipt/import. The tax is settled at the end of the tax period and in accordance with the general regulations of the Tax Collection Act. Entities which are required to register which carry out distance selling to consumers in this country are to similarly be registered for the distance selling, if the distance selling exceeds DKK 280 000. The due tax is paid after the end of the tax period for the food sold by distance selling in the period. If the entitys distance selling is less than DKK 280 000, then the tax is to be paid by the non-commercial party. Non-commercial parties who receive or import taxable food are to pay tax in accordance with the general regulations of the Tax Collection Act and the Customs Act, dependent upon whether the food is received from another EU country, from a country outside of the EU or from areas outside the EUs fiscal territory. The tax is in this case paid on receipt/import. Private persons that bring taxable food with them for their own consumption from another EU country are not to be required to pay tax. Private persons that themselves import taxable products from a country outside of the EU or from areas outside of the EUs fiscal area are to pay tax in accordance with the general regulations in the Customs Act on luggage. Entities which do not carry out activities which are required to be registered, and which only purchase taxable food from a warehousekeeper or from an importer to sell it for final consumption (supermarkets, butchers shops, etc.) or to use it in the production of food (delicatessen, bakers, etc.) are not required to be
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registered and pay tax, as tax is already paid on the food which these entities purchase from, for example, abattoirs, dairies, etc. It is noted that a limited byproduction of a food which is taxable in accordance with Article 1 does not result in that the entity is required to be registered for the tax. For example, a supermarkets sale of its own flavoured lard will not be included by Article 1(3) and a delicatessens ownmixed spreadable blended spreads, such as herb butter, will also not be included by Article 1(6). 3.2. Financial levy 3.2.1. General A so-called financial levy is proposed to ensure that food which is produced in this country using taxable food, cf. the Acts Article 1 (meat, dairy products, animal fat, edible oils, margarine, spreadable blended spreads or food, which can replace the above, and which have a saturated fat content of more than 2.3 %) is placed on an equal footing with similar food produced in foreign countries where there is no tax on saturated fat. A financial levy is a well-known concept which is also found, for example, in The Chocolate and Sugar Tax Act. The financial levy is identical to the tax on the saturated fat on the taxable food specified in Article 1. This means that tax is to be paid on imported food, where taxable food/constituents are used in its production, at a rate of DKK 16 per kg of saturated fat. 3.2.2. The taxable area The financial levy is charged on food which is produced in foreign countries and which is imported into the country from other EU countries, from countries outside the EU or from areas located in the EU which are not included in the EUs fiscal territory. The financial levy is therefore a tax on processed food. The import of the food specified in Article 1 is therefore included in the general tax on saturated fat. The financial levy is to be paid on the amount of saturated fat which is used in the production of the imported food on which a financial levy is required to be paid, to ensure this food and food on which a financial levy is required to be paid in accordance with Article 1 are treated uniformly. For example, tax is required to be paid on the saturated fat in the
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constituents used in the production of the food and which originates from the taxable products in Article 1 (meat, dairy products, animal fat, edible oils, margarine or spreadable blended spreads). Tax is similarly not required to be paid on saturated fat which originates from other constituents in the food, such as grain, etc. For example, a financial levy would be required to be paid on the meat, oil and cheese (or pizza topping) which is used in the production of food such as lasagne, pizza, etc. The financial levy is paid on the amount of raw meat, oil, and cheese used in the production of the food. This means that the producer of the lasagne, pizza, etc. purchases the specified constituents with tax and is not able to make deductions for waste, irrespective of whether the waste is a result of production waste, process waste or other. 3.2.3. Setting of the base amount on which tax is to be paid The taxable party is to notify of the saturated fat content in the food specified in Article 1 which is used in the production of food on which a financial levy is required to be paid, which is imported or sold via distance selling into the country. The setting of the base amount on which the financial levy is to be paid differs from the setting of the base amount on which tax on the food specified in Article 1 is to be paid, as it is not possible to use any voluntary nutrition labelling on the food, as this only provides information on the amount of saturated fat in the food and not on the amount of saturated fat used in production, which is the amount a Danish producer of a similar food would be required to have paid tax on. Nutrition labelling furthermore provides information on the saturated fat content in the food. The saturated fat can however originate from other food such as grain that is not subject to the tax. The taxable party can also not carry out a specific analysis of the food, as this analysis will also only show the saturated fat content of the food and not the saturated fat content of the taxable food used in production. This food is not in itself taxable in accordance with the Acts Article 1. However, where food is produced of taxable constituents included by Article 1, it is reasonable to use producer declarations which today
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are known from the Chocolate and Sugar Tax Act. Producer declarations are used to determine the base amount on which tax is to be paid, so that an entity which imports or sells food by distance selling can declare and settle the financial levy. Producer declarations do not differ significantly from the information which the producer is to notify in advance on the ingredients in the food. These ingredients are to be listed in descending order by amount, so that the ingredient which there is most of in the food is specified first and the ingredient which there is least of is specified last. The producer declaration is drawn up by the producer/the manufacturer. The manufacturer can use the publically available food information in the Food Composition Databank in the preparation of the declaration, which provides average standards for saturated fat content in specific foods. The amount in which the amount of tax due is to be based for meat is however to be calculated using the average rates specified in Annex 1. If the Minister for Taxation chooses to use the authorisation granted to the Minister by Article 6(6), the base amount on which tax is to be paid can also be set using this. If, for example, 500 g meat and 100 g cheese is used in the production of the food, then the financial levy is to be paid on the saturated fat content in the specified volumes. Annex 1 is used for the meat, while the amount of saturated fat in cheese can be set based on publically available food information or information from the cheese producer on the saturated fat content of these. The saturated fat content of some foods varies. For example, the saturated fat content of sunflower oil depends on whether the sunflowers are grown in Spain or Germany and cheese saturated fat content depends on the season, as the fat content of milk also varies with season. Such minor variations do not however require that the taxable party must continuously procure new producer declarations. The taxable parties are to be able to document the saturated fat content adequately. The documentation of an accurate average saturated fat content for the food is however sufficient. The same applies to an importer of composite food such as bags of mixed chocolates, caramel, etc., where the chocolate contains saturated fat, as fat is added to
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the chocolate and caramels are made of butter. The contents of such bags can vary. However, it is also sufficient that the importer can document an accurate average saturated fat content in the bags. If the taxable party can not present a producer declaration, tax is to be paid on the total saturated and unsaturated fat content of the food. If the taxable party cannot provide this information, then the tax is to be paid on the foods total net weight. The last method stated above for setting the base amount on which tax is to be paid is a recourse regulation, which is to ensure that entities do not speculate in using any favourable recourse regulation, but attempt to determine the real base amount on which tax is to be paid on the food. The recourse regulation applies to food which is included by the Act, except meat, as the base amount on which tax is to be paid for meat is to be based on the average rates in Annex 1, and therefore it will always be possible to determine a base amount on which tax is to be paid for meat. 3.2.4. Registration Persons who are liable to pay financial levies are, in conformity with the general fat tax, to be registered with the Danish Tax and Customs Administration. The registration threshold of DKK 50 000 also applies to sales of food on which financial levies are required to be paid. The general registration principles in excise duty legislation are also followed here. A difference between this and tax on saturated fat on food specified in Article 1 is that there is no registration for entities which manufacture taxable food included Article 1 and that entities therefore do not have the opportunity to register as warehousekeepers. Entities are therefore, in principle, registered as consignees or for their distance selling as the food is received or is imported from other countries or is sold by distance selling into the country. For distance selling, entities are however only required to be registered when its distance selling exceeds DKK 280 000 cf. the regulation in the VAT Act, as described in section 3.1.4. This means that for distance selling of less than DKK 280 000, it is the consignee who bears the obligation to pay the financial levy. For
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distance selling of more than DKK 280 000, it is the remote selling entity which is to pay the financial levy. In accordance with the taxation on saturated fat in food specified in Article 1, entities which import food intended for production of food for export or for other than human consumption are to be registered as warehousekeepers for the part of their production which is for export/non-food. This can, for example, be the import of semi-finished products which do not represent the import of a taxable food specified in Article 1, and which also are not a food which is to be sold for domestic market nor is the food fit for human consumption. These entities produce food for export or non-food. The same consideration for these entities liquidity as described in section 3.1.4 therefore applies. If the food is received or imported into this country, the entity is to be registered as consignee so that the food can initially be received tax-free. Tax is however to be paid at the end of each tax period for food received or imported in the period. Entities which sell by distance selling are to similarly pay tax after the end of the tax period for food sold by distance selling in the period, unless their distance selling is below DKK 280 000 cf. the VAT Act, Article 47(2), cf. this Acts Article 48(3), as the tax is paid by the non-commercial party. Non-commercial parties who receive or import taxable food are to pay tax in accordance with the general regulations of The Tax Collection Act and the Customs Act, dependent upon whether the food is received from another EU country, from a country outside of the EU or from areas outside the EUs fiscal territory. The tax is in this case paid at the latest on receipt/import. Private persons that bring taxable food with them from another EU country are not required to pay tax. Private persons that themselves import taxable products from a country outside of the EU or from areas outside of the EUs fiscal area are to pay tax in accordance with the general regulations in the Customs Act on luggage. 3.3. Common regulations 3.3.1. Declaration and settlement
The joint regulations apply both to the tax on saturated fat in accordance with Article 1 and the financial levy in accordance with Article 8, and follows the principles in other excise duty legislation. The regulations in the Tax Collection Act apply to registered entities. This means that the tax period/settlement period is the month and such declarations are to be submitted to the Danish Tax and Customs Administration at the latest by the 15th of the month after the end of the tax period. The Tax Collection Act also applies to deficient declaration or accounts, which means that the Danish Tax and Customs Administration can carry out a provisional setting of the entitys tax liability and that the entity is required to pay a fee for this. Interest is to be paid in the event of late payment of the tax. Non-commercial consignees that receive products from another EU country are also required to pay tax/financial levies in accordance with the regulations in the Tax Collection Act. This means that they should declare and pay at the latest by the point in time at which the products are received. The payment of tax/financial levies can be omitted where the amount is less than DKK 50. Non-commercial consignees that receive products from a country outside the EU or outside the EUs fiscal territory are to declare and pay tax/financial levies in accordance with customs regulations, which means on import. 3.3.2. Deductions and refunds In line with other excise duty legislation, it is proposed that a registered warehousekeeper can deduct taxes/financial levies on taxable food which is supplied to other registered warehousekeepers, is exported, is supplied to non-food, to diplomats, etc., which is lost or which is returned to the entity. Other entities can, based on specific conditions, apply for tax/financial levy refunds for food which is exported or used in the production of non-food. 3.3.3. Invoicing and accounting regulations Invoice and accounting regulations are equivalent to such regulations in other excise duty legislation.
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Entities registered in accordance with this Act are therefore to issue invoices and keep accounts in accordance with the general regulations in excise duty legislation. 3.3.4. Inspection The control provisions are similarly in accordance with the control regulations in other excise duty legislation and provide the Danish Tax and Customs Administration with access to carry out inspections of entities included by the Act and to inspect the entities accounting materials, stock, etc. The entities are to assist the Danish Tax and Customs Administration with controls. The Danish Tax and Customs Administrations access also includes access to electronic materials. 3.3.5. Penalties The penalty provisions are also in accordance with the penalty regulations of other excise duty legislation. The current proposal does not propose particularly intensified regulations on the summation of fines in the event of several violations, as is found in the Mineral Water Tax Act. It will however be appropriate, after the tax/the financial levy has been in operation for a period of time, to evaluate the extent of fraud and therefore whether there is a need for intensified accounting or penalty regulations. 3.3.6. Other regulations Those who transfer, obtain, acquire or use taxable food on which tax has not been paid in accordance with this Act are to pay tax on the food. This relates primarily to unregistered entities or the noncommercial import of food, where tax is not paid. The Tax Collection Acts general regulations on, for example, security furthermore apply to situations in this Act. 3.4. Transition and entry into force provisions The Act comes into force on 1 July 2011. The Act comes into effect for food, when this is supplied from an entity registered as warehousekeeper on 1 July 2011 or later. The Act comes into effect for other entities registered as consignees or for distance
selling, for food which is received, imported or sold by distance selling on 1 July 2011 or later. The Act applies to non-commercial taxable parties that receive or import taxable food where the food is received within the country or is imported into the country on 1 July 2011 or later. Entities that are required to register are to furthermore be registered at the latest by 1 July 2011. Entities that wish that their registration is in place by 1 July 2011 should apply to the Danish Tax and Customs Administration a minimum of 2 weeks before 1 July 2011. The change of the break-even point for products included by wine tax class 2 and the increase in the wine tax and reduction in the additional levy for wine based alcopop applies to products which are supplied for consumption from registered entities, are declared for customs clearance or are imported after the rate changes come into effect. 3.5. Increase of the wine tax 3.5.1. Current legislation The wine tax was originally introduced in 1922 and is found today in Consolidation Act No 890 of 17 August 2006 (the Beer and Wine Act) with subsequent amendments. The wine tax is today paid in accordance with the alcohol content, such that the tax includes wine and fruit wine with an alcohol content of more than 1.2 % vol., but not more than 22 % vol., as products with an alcohol content of more than 22 % vol. are taxed as spirits. The tax is subdivided in Article 3 into 3 classes and the system has been in operation for many years. The tax is cf. Article 3(2): DKK 3.9 per litre, when the alcohol content is >1.2 %6 % DKK 6.14 per litre, when the alcohol content is >6 %15 % DKK 9.20 per litre, when the alcohol content is >15 %22 % The wine tax is an EU-harmonised tax, and is therefore subject to fiscal directives which set the framework for the tax structure and the tax rate. The EU Treatys general principles however also apply.
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The EU Treaty has, as a whole, the purpose of ensuring the free movement of goods between Member States under normal competition conditions, achieved through the removal of every form of protection resulting from internal taxes which act discriminatorily upon products which originate from other Member States, and to ensure internal taxes are completely neutral with respect to competition between domestic products and imported products. Taxes on beer and wine for example should, for this reason, be similar for the two product groups. The Beer Tax is set based on a sliding scale, so that the two tax structures cannot be directly compared. A break-even point is set where the tax on beer and wine is the same, and is set at 12 % There are however strong indications, when viewed in the light of the wine which is sold today, that a break-even point at 12 % is too low. A large part of the wine which is sold today, originates from overseas countries such as Australia, South Africa, and Chile. The wines are often strong sweet wines and have a higher alcohol content, typically 1314.5 %
4. Financial consequences for the public sector Consumption of saturated fat in Denmark can be determined using a number of sources. The diets of Danes between 2003 and 2008 show that the intake of saturated fat is approximately 35 g a day per Dane, which is equivalent to a total annual consumption of around 70 million kg for the entire population. Consumption of saturated fat is however in practice somewhat greater, as diet surveys relate to the foods on the plate and therefore do not include the saturated fat used in preparation, i.e. cooking fat and deep-fat frying oil or which is discarded because it has become too old. Information from the industries involved and Statistics Denmark on food consumption, import, and export, etc. which, when compared with information contained in the Food Composition Databank on the saturated fat content in different foods, can be combined with the information from the diet surveys to provide an estimate of consumption of saturated fat in Denmark which originates from food included by the tax. Based on this information, it can with a significant 3.5.2. The drafts content degree of uncertainty be estimated that that the base The higher general alcohol content in wine leads to amount on which tax is to be paid is approximately 82 the proposal to change the break-even point for tax million kg, cf. Table 2. The Danish Ministry of class 2 wines from 12 to 13.5 %. This means that the Taxation will, due to the significant uncertainty with tax of DKK 6.14 is raised by 73 cents to DKK 6.87. respect to the estimation of the base amount on which An increase in the wine tax results also in an tax is to be paid, follow revenue development and will amendment to the additional levy on wine based present a proposal for the revision of the Act where alcopop. The additional levy is balanced such that the there is a need for this so that the expected revenue, as tax charged at a specific break-even point is the same minimum, is achieved. irrespective of whether the alcopop is based on spirits, As presented in Table 2, fat used in households and malt or wine. cheese, cream, crme fraiche, etc. contribute more than A tax increase of 73 cents for wine tax therefore 20 million kg, while other food containing butter, results in a reduction of the additional levy for wine margarine, etc. is estimated to contribute just 18.4 based alcopop of 73 cents. million kg of saturated fat. Consumption of meat is however estimated to contribute a basis of 19.6 million kg. Table 2. Estimated base amount on which tax is to be paid Estimated Estimated consumption saturated fat content Million kg Million kg Million kg Fats used in households (butter, blended 69.7 23.5
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spreads, margarine, edible oils, etc.) Cheese, cream, crme fraiche, etc. Meat, etc. (beef, pork, and poultry meat, and other meat) Other products (biscuits, Danish pastry, chips, etc.) Total
137.7 442.0 136.8 786.2
20.3 19.6 18.4 81.9
Source: Danes Diets 2003-2008, Danes Diets 2000-2002, Danes Diets 1995-2006, Statistics Denmark: 1) Agriculture statistics, 2) Consumer survey, 3) Industry and 4) External Trade Statistics, Danish Association of Margarine Manufacturers (MIFU), the Danish Dairy Board, the Food Composition Databank and own calculations and estimates.
Based on the revenue from the wine tax in 2009, it can be estimated that consumption of wine between 6 % and 15 % was 150 million litres. Based on this and by application of the same calculation assumptions as were used in association with the Spring Package 2.0, it can be estimated that the proposal will in total result in a permanent revenue excluding VAT of DKK 1 200 and a permanent financing of DKK 1 500 million including VAT in accordance with the Spring Package 2.0, and Service Inspection of the Spring Package 2.0, cf. Table 3. The proposal is a part of the Spring Package 2.0. The revenue effects, with the exception of the first line in Table 3, are calculated inclusive of VAT and corrected for refunds. They are therefore calculated as consumer prices and therefore can be directly compared with revenue effects of the amendments in the income taxes.
Table 3. Revenue effect of the tax on saturated fat in specific food and the increase in the wine tax Million DKK and Permanent 2011 2012 2013 2014 2015 2019 Fiscal year 2011 level effect 2011 effect Revenue on account excluding VAT Tax on saturated fat 1 125 Increase of wine tax 75 Total 1 200 Revenue including VAT Tax on saturated fat 1 400 Increase of wine tax 100 Total 1 500 Revenue after refund correction Tax on saturated fat 1 400 Increase of wine tax 100 Total 1 500 Revenue after refund correction and behaviour Tax on saturated fat 1 350
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650 50 700
1 300 100 1 40 0 1 550 150 1 70 0
1 250 100 1 35 0 1 550 150 1 70 0
1 200 100 1 30 0 1 450 150 1 60 0
1 150 100 1 25 0 1 400 150 1 55 0
1 150 100 1 25 0 1 400 150 1 55 0
550 50 600 675 75 750
825 75 900
825 75 900
1 550 150 1 70 0
1 550 150 1 70 0
1 450 150 1 60 0
1 400 150 1 55 0
1 400 150 1 55 0
675 75 750
800
1 500
1 500
1 400
1 350
1 350
650
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Increase of wine tax 75
100 100 1 60 1 60 Total 1 425 850 0 0 If this however relates to an individual tax proposal, it would be more accurate to look at the revenue calculated in factor cost, excluding VAT and without refund correction. This is due to the increased tax revenue which as a result means that other VAT and taxable consumption is displaced and this is around the same level of revenue which is gained as a result of the revenue effect from VAT which is lost. Calculated as factor costs, the total immediate permanent revenue therefore is estimated to approximately be DKK 1 200 million and around DKK 1 150 million after behaviour. The tax on saturated fat is estimated to reduce the consumption of saturated fat from taxable food by around 4 % and will therefore have a beneficial effect on the health of the population. The tax on saturated fat will furthermore generate an increased cross-border trade incentive, which however in isolation will not be of great significance. This is due to taxable products having a limited shelf life in most cases. It must however be expected that some of the taxable products will be included in the range of cross-border trade shops and therefore be purchased by Danes in association with shopping for other cross-border trade. The tax increase on wine of between 6 and 15 % alcohol is estimated to result in a reduction of consumption of 1 %, while cross-border trade is estimated to increase by 5 % It is noted, with respect to the financial consequences for citizens, that the tax is expected to be fully passed on in the prices. This will mean that the prices of food with taxable saturated fat content will increase. The price increases will depend on the saturated fat content. Similarly, the tax on wine is expected to be fully passed on in the prices, which means that the price of a bottle of wine will increase by 68 cents including VAT. For the fiscal year 2011 the proposal is estimated to result in revenue of around DKK 550 million in total excluding VAT and including behaviour. The distribution of this is approximately DKK 500 million
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50
100 100 100 50 1 50 1 45 1 45 700 0 0 0 relating to the tax on saturated fat and just under DKK 50 million relating to the wine tax. Revenue from the taxes only goes to the state. As the tax on wine based alcopop is balanced in relation to the tax on spirit and malt based alcopop, the wine based additional levy for alcopop with a alcohol content of more than 10 % is reduced, so that the total tax on an alcopop with more than 10 % alcohol is the same irrespective of which type of alcohol the completed product is based on. The overwhelming majority of wine based alcopop has an alcohol content of less than 10 %. The change is therefore estimated to not result in appreciable consequences for the revenue from the additional levy on alcopop. 5. Administrative consequences for the public sector The Draft Act is estimated to result in one-time costs for postage, IT development, and adaptations of DKK 0.5 million. One-time costs relating to the implementation in 2011 of 4 person years, which is equivalent to DKK 2.4 million, are furthermore estimated to be incurred. The Draft Act is furthermore, and with some uncertainty, estimated to result in operating expenses of 10 person years for guidance, settlement, and initiatives as from 2011, equivalent to DKK 6.0 million a year. 6. Financial consequences for the commercial sector The Draft Act is built up in accordance with the template used by other Danish excise duty legislation, i.e. the Chocolate Tax Act or the Nitrogen Tax Act. The Act is therefore designed so that tax is only charged on consumption of taxable products in this country, which have either been produced here or imported. Export of taxable products and products with taxable product content are exempt from the tax. The tax therefore in principle does not distort competition with respect to Danish and foreign produced products, irrespective of whether they compete in Denmark or in foreign countries.
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Tax is only incurred upon consumption in Denmark. As the tax is expected to be fully passed on in the prices, it is considered that entities will not be burdened by the tax. The tax is however expected to result in a fall in consumption of approximately 4 % and which is therefore expected to result in a similar reduction in commercial sales. 7. Administrative consequences for the commercial sector The Danish Commerce and Companies Agency Centre for Quality in Business Regulation (CKR) has pronounced the following on the administrative consequences: CKR has assessed the administrative consequences for the approximately 160 producers and approximately 1 450 importers included by the Draft Act by one of the Ministry of Economic and Business Affairs business panels. The expected administrative reorganisation costs have been calculated to be approximately DKK 161 million. This relates to the requirement that producers/importers are registered, preparation of the monthly payment of tax (establishing technical solutions and any collection of information on proportions of saturated fat in food), and counting of existing stock. The expected ongoing administrative costs have been estimated to be approximately DKK 35 million a year at society level and are in particular associated with the monthly settlement of the tax and financial levies. Individual entities will therefore incur very large reorganisation and ongoing costs. The Danish Ministry of Taxation has, in association with the determination of the administrative consequences of the proposal, followed a recommendation from consulted entities. The above specified de minimis threshold for annual sales is therefore expanded from only applying to producers to also include importers, which CKR views positively. It is however not possible to determine how many importers and producers this exempts from the Acts requirements. 8. Administrative consequences for the citizens
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The proposal results consequences for citizens.
in
no
administration
9. Environmental consequences The proposal consequences. results in no environmental
10. The relationship to EU Law The Danish Ministry of Taxation has been in dialogue with The EU Commission with respect to a clarification of whether the tax on saturated fat in some food contains state aid elements. The original proposal did not include meat. The EU Commission however found that the exclusion of meat, which is a primary source of saturated fat, must be considered to be state aid to the relevant industry. Meat has therefore, in this version of the Draft Act, been included in the Draft Act, so that the proposal no longer contains state aid elements. The EU Commission is furthermore notified of the Draft Act in accordance with the information procedure directive, cf. Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations. It is expected that the European Parliament and the Council issue a regulation on food information to consumers in 2010 with effect from 2013 and 2015 respectively. This regulation will include intensified requirements relating to the nutrition labelling of food, including requirements relating to information on the proportion of saturated fat in the food. When the regulation has been introduced, it will be appropriate to evaluate whether the new regulations can provide benefits in relation to setting the base amount on which tax is to be paid in relation to the food specified in Article 1(2)(7). The Wine Tax is an EU harmonised tax which is regulated by the alcohol taxation directives, cf. Council Directive 92/83/EEC on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (including guidelines for new taxation) and Council Directive 92/84/EEC on the approximation of
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the rates of excise duty on alcohol and alcoholic beverages (including minimum rates), which define thresholds for alcoholic beverages and specifies guidelines for their taxation. 11. Authorities and organisations consulted A previous version of the Draft Act was distributed for consultation in the late summer of 2009. The proposal has however been expanded to include meat and has been changed a great deal. It has therefore been re-distributed for consultation to the following: Advokatsamfundet, Arbejderbevgelsens Erhvervsrd, Bryggeriforeningen, CEPOS, Dansk Arbejdsgiverforening, Danske Advokater, Dansk Dagligvareleverandrforening, Dansk Erhverv,
Datatilsynet, DI, Dansk Isindustri, Danske Regioner, Dansk Supermarked Gruppen, Dansk Told- og skatteforbund, Dansk Transport og Logistik, Danske Slagtermestre, De Samvirkende Kbmnd, Den Danske Skatteborgerforening, Erhvervsog Selskabsstyrelsen CKR, Finansforbundet, Finansrdet, Finanstilsynet, Foreningen af Dagligvare Grossister, Foreningen af Danske Revisorer, Forsikring & Pension, Frederiksberg Kommune, Foreningen Registrerede Revisorer, Foreningen af Statsautoriserede Revisorer, Horesta, Hndvrksrdet, Konkurrencestyrelsen, Kommunernes Landsforening, Kbenhavns Kommune, Landbrug & fdevarer, Landsskatteretten, Margarineforeningen, Retssikkerhedschefen SKAT and Skatterevisorforeningen.
12. Summary form Total evaluation of consequences of the Draft Act Positive consequences/lower costs Financial consequences for the public sector Administrative consequences for the public sector The proposal is estimated to provide a permanent financing of approximately DKK 1 500 million inclusive of VAT. None
Negative consequences/additional costs None
Financial consequences for the commercial sector
None
One-time costs of around DKK 500 000. One-time costs relating to implementation in 2011 of approximately DKK 2.4 million and ongoing operating expenses of approximately DKK 6 million a year The tax is expected to be passed on to the users and is therefore not expected to directly affect entities. A fall in consumption of approximately 4 % is however expected, which can result in a similar reduction in the affected commercial sales. Reorganisation costs of approximately DKK 161 million DKK and on-going administrative costs of approximately DKK 35 million None None
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Administrative consequences for the commercial sector
None
Administrative consequences for the citizens Environmental consequences
None None
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The relationship to EU Law
The EU Commission is notified of the Draft Act in accordance with the information procedure directive, cf. Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations.
Comments on the individual provisions of the Act On Article 1 Articles 1-7 relate to the general fat tax. It is proposed in the provision that the taxable area is set through a list of more specifically defined food. The tax only includes food, which means food fit for human consumption. In other words, food used for other purposes than human consumption (also called non-food) such as animal feed or as a fuel for vehicles, etc. is exempted from the tax, as the purpose of the tax is to promote better diets. Additives are furthermore not included by the tax, as they can not be considered to represent independent food. Food supplements which consist of oil bound vitamins, minerals, vitamin pills and omega-3 capsules, and similar and medicine which would be included as a taxable food are also not included by the tax as such products cannot be considered to represent independent food. The food is only included by the tax if the saturated fat content of the food exceeds 2.3 % by weight. Taxable food is proposed defined using the EUs Combined Nomenclature, also called the customs tariff, which delimits a wide range of products in relation to each other by application of the code numbers. The codes can be found in the Combined Nomenclature, cf. Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff. Tax is therefore proposed on the following food: No 1. Meat. Meat includes meat from the animals specified in Annex 1. The Annex (which contains average standards of saturated fat content) includes the meat types which are generally consumed in Denmark (beef, pork, poultry, mutton, goat, horse, game, etc.) and a
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collective regulation for more rarely consumed meat such as kangaroo, crocodile, snake, etc. It has been found that it is not appropriate to use the nomenclature for the definition of meat, as the nomenclature also specifies some cuts such as ham, which therefore provides the opportunity for confusion, as the tax on meat is proposed to be based on the average saturated fat content in the individual meat types. No 2. Dairy products under codes 0401- 0406. No 3. Animal fat which is melted off or extracted in other ways, under codes 1501-1504 and 1516. The reason why animal fat is not included in No 1 (meat) and the standard rate for this, but has been given a separate number in Article 1, is that it is possible to melt off or in other ways extract fat from animals which can be used as a substitute for the other taxable oils and fats. If animal fat was included in No 1, the standard rate for melted off animal fat would be considerably lower than here, where it is separated into a separate number. No 4. Edible oils and fats under codes 1507-1516. Edible oil can be characterised as a food which is liquid at room temperature and which almost exclusively consists of fat. No 5. Margarine and other food under code 1517, No 6. Spreadable blended spreads under position 2106. No 7. This is a collective regulation for other food which contains more than 2.3 % saturated fat and which, based on an overall evaluation of its nature and use and the way it is marketed, can be considered to be a substitute product for or imitation of the products which are specified under Nos 1-6. An example is pizza topping which is not categorised as a dairy
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product as the cheese is not made from milk products, but which is comparable to grated cheese and is marketed and used for the same purpose. It is however noted that the food will only be included by the tax if it contains more than 2.3 % saturated fat. This type of provision is found in the Chocolate and Sugar Tax Act and has the purpose of ensuring that comparable products, which can directly substitute taxable food, are also included by the tax, so that comparable products are similarly taxed. On Article 2 It is proposed in the provision that the tax rate is set at DKK 16 per kg saturated fat in the taxable food. The tax is proposed to be set at DKK 16 in the interests of the revenue which the tax is to generate. Taxable food means the food which is specified in Article 1. On Article 3 In Paragraph 1, a definition of who is the taxable party is proposed. The following are proposed to be under an obligation to pay tax: Persons who commercially, which means entities, produce taxable food in this country, receive taxable food into this country from another EU country, import taxable food into the country from a country outside the EU or from areas located in the EU, which are not included in the EUs fiscal territory or sell taxable food from another EU country by distance selling, when the entity is registered in accordance with the VAT Acts Article 47(2), cf. this Acts Article 48(3). It is noted that the tax is only to be paid if the entitys sales of taxable food exceeds the registration thresholds specified in Article 4(6). The geographical area of application for the tax, as stipulated by this Act, is equivalent to the geographical area of application of other Danish excise duty legislation. This means that it is equivalent to the Danish VAT area, and therefore the Danish territories, territorial waters, and the airspace over these areas. Excise duty legislation does not apply to the Faroe Islands and Greenland, which in this context are considered to be comparable with countries outside the EU. The legislation similarly applies to the Free Port of Copenhagen where products are delivered for
storage for subsequent export, refer to SKM2001. 655. LR. A country outside the EU is proposed to be called a third country, which means a country that is not a member of the EU. Areas which are located in the EU, but which are not included in the EUs fiscal territory are considered to be areas such as Livigno, which is a part of Italy but is a customs and tax free area, and independent areas such as Andorra. Distance selling means the sale of products such that the product is directly or indirectly sent or transported by the seller or on behalf of the seller to a private purchaser in another country. This typically relates to post order sales, including internet trade. Foreign entities which operate distance selling from other EU countries are, in accordance with VAT regulations, to be VAT registered in Denmark if the total delivery into the country exceeds DKK 280 000 cf. the VAT Act Article 48(3). It is therefore proposed in this Act that entities which are registered in accordance with the VAT Act for their distance selling and which sell taxable food should also be registered in accordance with this Act. Similar regulations apply to the Chocolate and Sugar Tax Act, the Pesticide Tax Act and the Packaging Tax Act. In Paragraph 2, it is furthermore proposed that a non-commercial party who receives taxable food into this country or imports taxable food into the country is obliged to pay tax, when the remote selling entity is not registered for its distance selling cf. the above regulations in the VAT Act. Refer to Articles 15 and 16 relating to the declaration and settlement of tax for non-commercial parties. It is noted that a private person in another EU country who acquires taxable food for their own use and transports the products themselves into the country is not required to pay tax. A private person who brings food home from a third country is to pay tax in accordance with the Customs Acts regulations on luggage. On Article 4 It is proposed in the provision that the regulations for registration of taxable entities in general follow the registration provisions in other tax legislation. Entities
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are to however only be registered and settle tax if their annual sales of taxable products excluding tax exceeds DKK 50 000. In Paragraph 1 it is proposed that entities that produce taxable food cf. Article 1, in this country, are to be registered with the Danish Tax and Customs Administration as warehousekeepers, before the taxable activity has begun. In excise duty legislation, it is in general entities which produce taxable food that can be registered as warehousekeepers. A warehousekeeper registration means that the tax is first settled when the product leaves the warehousekeeper. The entity is therefore not charged tax prior to this point in time. Warehousekeeper registration also means that the entity does not pay tax on its waste, as the tax is settled on the food which leaves a warehousekeeper. A warehousekeeper can however also supply taxable food without settling tax on delivery, if taxable food is supplied to another registered warehousekeeper or is for export. Refer to Article 17 on deductions and refunds. In Paragraph 2 the general access to registration as a warehousekeeper is proposed to be expanded, as entities which use food which is taxable in accordance with Article 1, for production of food for export or for other than human consumption/non-food, can also be registered as warehousekeepers for this part of the production. The proportion of the production for which the entity can be registered as a warehousekeeper is set based on the entitys proportion of production which is for export or non-food production in the previous year. This means that if the entity uses the taxable food specified in Article 1 for production of food for the domestic market, this part of the production will not be included by the warehousekeeper registration and is to be carried out using taxable food. Registration is to take place before the activity has begun. In Paragraph 3 it is proposed that entities which receive taxable food in this country from another EU country and entities which import taxable food to the country from a country outside the EU or from areas in the EU which are not included in the EUs fiscal territory are to be registered with the Danish Tax and
Customs Administration as consignees before transport of the food from other countries has begun. An intermediary who operates intermediary trade, meaning it exclusively sells taxable products onward to other entities registered in accordance with this Act, can however be registered as a warehousekeeper. Registration is to take place before the taxable activity has begun. It is noted that limited sales to personnel or own consumption does not prevent an entity registering as a warehousekeeper in accordance with this provision, even though these sales are in fact considered to be deliveries for consumption cf. Article 7(5). An entity which already is registered as warehousekeeper cf. Article 4(1), because it produces taxable food, is not to also be registered as a consignee for receipt or import of the taxable food specified in Article 1. It is however noted that if a warehousekeeper also receives or imports food on which financial levies are required to be paid, as specified in Article 8, that the entity is to be registered as a consignee of food on which financial levies are required to be paid. In Paragraph 4 it is proposed that entities which sell products by distance selling, cf. Article 3(1)(4), here in this country from another EU country are to be registered for their distance selling and registration is to take place before transport of the food from other countries has begun. In Paragraph 5 it is proposed that entities which are registered receive a certificate of registration. In Paragraph 6 it is proposed that only entities with an annual taxable sales excluding tax of more than DKK 50 000 are registered. If the entitys sales exceed the registration threshold, then the entity is to also pay tax on its sale of taxable food from the first DKK. The purpose of the registration threshold is to exempt small commercial parties which only have a very small production of taxable food. Examples include butchers shops sales of flavoured lard melted off from taxable meat. On Article 5 In Paragraph 1 a provision is proposed that describes in more detail what an entity which is registered as a warehousekeeper can carry out, without
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the tax upon taxable food being required to be paid. The entity can produce, process, and store bonded food. The entity can receive bonded food from other warehousekeepers, receive or import such food from other countries, and supply bonded food to other warehousekeepers or to foreign countries (export). In Paragraph 2 it is described what an intermediary that is registered as a warehousekeeper can carry out, without the tax on taxable food being required to be paid. The entity can receive bonded food from other warehousekeepers and receive or import such food from other countries, if the food is intended for resale to entities registered in accordance with this Act. In Paragraph 3 it is described what other entities registered as consignees are entitled to carry out. Consignees can receive or import taxable food from other countries without the tax being required to be paid on receipt or import. On Article 6 In Paragraph 1 it is recommended how the base amount on which tax is to be paid on account is set. The base amount on which tax is to be paid is the weight of saturated fat in the taxable food. This means tax is to be settled on 50 % of the weight of taxable food which contains 50 % saturated fat. In Paragraph 2 it is proposed that the taxable party is to be able to document the weight of saturated fat in taxable food. In Paragraph 3 it is proposed how the base amount on which tax is to be paid is determined. For meat, taxable parties are to use the average rates for saturated fat content in meat types as specified in Annex 1, when cut meat is supplied. If half, quarter or sixth animals are supplied, a deduction of 27.5 % is to be made from the base amount on which tax is to be paid on pork and 25 % from the base amount on which tax is to be paid for other animal species, to compensate for bones, etc., which are cut away at a later stage. The taxable party can however choose to settle the base amount on which tax is to be paid on cuts which are supplied pre-packaged to retail stores at the cut level. The saturated fat content of the individual cut can either be set using the food information available from the Food Composition Databank or by carrying out a
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specific measurement of the saturated fat content in the cut. In accordance with Paragraph 4, the entity can use one of the following methods for determining the base amount on which tax is to be paid on other taxable food: The nutrition labelling Nutritional labelling is not obligatory for all food. The base amount on which tax is to be paid can be determined using nutritional labelling where food has this labelling. Food information The taxable party can also choose to use publically available food information which sets average standards for the levels of saturated fat in specific food. Analysis Finally, the taxable party can determine the base amount on which tax is to be paid upon a technical analysis of the specific food. Analysis is not necessarily required to be carried out by an external laboratory. It can be carried out internally in the entity. Analysis is to however objectively document the saturated fat content of the taxable food. In Paragraph 5 a recourse regulation is proposed which can be used where the methods in Paragraph 4 cannot be used to determine the base amount on which tax is to be paid on the taxable food except meat. The recourse regulation stipulates that tax is to be paid on the products total fat content, which means the saturated and unsaturated fat or, where this also can not be documented, tax is to be paid on the foods net weight. Net weight means the foods total weight excluding packaging, but including any brine or similar. In Paragraph 6 it is proposed that the Minister for Taxation is granted an authorisation to set average standards for foods included in Article 1, which taxable parties can use to set the base amount on which tax is to be paid on the food. There is no publically available food information for some codes. For example, there are only a very few cheeses in the Food Composition Databank www.foodcomp.dk. The
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setting of standards for more types of cheeses would be helpful. If the Minister for Taxation uses this authorisation, this is expected to be exercised in subsequent Orders. On Article 7 The provision sets how the base amount on which tax is to be paid within a tax period is to be determined. The way registered entities declare and settle the tax differs dependent upon the entitys registration status. The determination of the base amount on which tax is to be paid for the tax period follows the general principles in other excise duty legislation. The provision on the determination of the base amount on which tax is to be paid is to be viewed in the context of the provision on deductions and refunds in Article 17. In Paragraph 1 it is proposed that entities which are registered as warehousekeepers settle the base amount on which tax is to be paid for a tax period based on the saturated fat content of the taxable food which is supplied from the entity in the tax period. An entity which has supplied 100 litres of oil is to pay tax on the amount of saturated fat in the 100 litres of oil and settle the tax based on this. If 10 litres of the oil is supplied to foreign countries (export), the entity can deduct the 10 litres of oil before the tax is settled, such that tax is only paid on the saturated fat in the 90 litres of oil cf. Article 17. An entity, which is food taxable as specified in Article 1(1) can choose to settle the base amount on which tax is to be paid after the animal is slaughtered instead of waiting until the meat is supplied. The entity can, in this case, deduct 27.5/25 % from the base amount on which tax is to be paid before settlement cf. Article 6(3). In Paragraph 2, it is proposed that entities which are registered as warehousekeepers because they use the taxable food specified in Article 1 in the production of food for export or for food that is unfit for human consumption determine the base amount on which tax is to be paid for a tax period based on the saturated fat content in the taxable food which is produced and supplied by the entity in the tax period. The entity will be able to similarly deduct taxable food which is supplied to export cf. Article 17.
An entity which does not exclusively produce for export or non-food, but also produces food for the domestic market, will have used taxable food in domestic market production and is not required to settle tax on this. In Paragraph 3 it is proposed that entities which are registered as consignees settle the base amount on which tax is to be paid for a tax period based on the saturated fat content of the taxable food specified in Article 1, which is received or imported by the entity in the tax period. In Paragraph 4 it is proposed that entities which are registered for distance selling (and therefore have deliveries in this country of more than DKK 280 000 cf. Article 3(1)(4)), determine the base amount on which tax is to be paid for a tax period based on the saturated fat content in the taxable food which is sold by distance selling in this country in the tax period. In Paragraph 5 it is proposed that an entitys own consumption of taxable food is to be considered to be equivalent to delivery of taxable food. Sales to personnel are included in this. On Article 8 Articles 8-13 relate to the financial levy. In Paragraph 1, a provision is proposed which describes the area in which financial levies are required to be paid. A financial levy is to be paid on the taxable constituents, cf. Article 1, which are used in the production of food, when such food is received, imported or sold by distance selling into the country. This means that tax is to be paid on the meat, dairy products, melted off/extracted animal fat, edible oils, margarine, spreadable blended spreads or substitute products for this, when these foods are used in the production of the imported/remotely sold food. The purpose of the financial levy is to ensure that food produced in Denmark and in foreign countries is on an equal footing. If a financial levy was not proposed, foreign produced food would gain an advantage in relation to domestic produced food. In Paragraph 2 it is proposed that the financial levy rate is the same as the rate for food which is taxable in accordance with Article 1. This means that the financial levy is DKK 16 per kg of saturated fat in the food, cf. Article 1, which is used in the production of
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the food. In other words, a financial levy is to be paid on the weight of saturated fat in the oil, cheese, and meat used in the production of lasagne, pizza, etc. Danish produced pizza is therefore on an equal footing with foreign produced pizza, as the Danish producer has used taxable food in production. On Article 9 In Paragraph 1 the identification of the taxable parties is proposed. The following have an obligation to pay financial levies: Persons who commercially (entities) receive food into this country in which a financial levy is required to be paid, from another EU country, who import into the country, food on which a financial levy is required to be paid from a country outside the EU or from areas located in the EU which are not included in the EUs fiscal territory, or sell food on which a financial levy is required to be paid from another EU country by distance selling. Entities that carry out distance selling are however only required to register and pay tax if the entity is registered in accordance with the VAT Act, Article 47(2) and Article 48(3). Refer to Article 3. It is noted that the financial levy is only to be paid if the entitys sales of food on which a financial levy is to be paid exceeds the registration thresholds specified in Article 4(6). In Paragraph 2 it is furthermore proposed that a non-commercial party who receives food on which a financial levy is required to be paid into this country or imports food on which a financial levy is required to be paid into this country, is obliged to pay the financial levy, when the remote selling entity is not registered for its distance selling cf. the above regulations in the VAT Act. Refer to Articles 15 and 16 relating to the declaration and settlement of financial levies for noncommercial parties. It is noted that a private person in another EU country who acquires food on which a financial levy is required to be paid, for their own use, and transports the products themselves into the country, is not required to pay a levy. A private person who brings food home from a third country is to pay a financial levy in accordance with the Customs Acts regulations on luggage.
On Article 10 The provision contains regulations on the registration of entities that are liable to pay financial levies as a result of the registration provisions in other excise duty legislation. It is noted that the entities are only required to be registered if their annual sales of products on which a financial levy is required to be paid excluding tax exceeds DKK 50 000 cf. Paragraph 4. In Paragraph 1 it is proposed that entities which receive food on which a financial levy is required to be paid, into this country from another EU country and entities which import food on which a financial levy is required to be paid, into the country from a country outside the EU or from areas in the EU which are not included in the EUs fiscal territory, are to be registered with the Danish Tax and Customs Administration as a consignee before transport of the food from other countries has begun. In Paragraph 2 it is proposed that entities which produce food for export or for other than human consumption, from food on which a financial levy is required to be paid in accordance with Article 8, can also be registered as a warehousekeeper for this part of their production. The warehousekeeper registration will not include food produced by the entity for the domestic market. In Paragraph 3 it is proposed that entities which sell products by distance selling into this country from another EU country are to be registered for their distance selling before transport of the food from other countries has begun. The entity is however only required to be registered for its distance selling if its total deliveries into this country exceed DKK 280 000 cf. the VAT Act Article 47(2), and Article 48(3). It is noted that entities that also import or produce the taxable food specified in Article 1 are to also be registered for this. In Paragraph 4 it is proposed that Article 4(5) and (6) apply, which means that entities which are registered with the Danish Tax and Customs Administration receive a registration certificate, and that only entities with an annual sales of food on which a financial levy is required to be paid excluding tax that exceeds DKK 50 000 are to be registered and pay financial levies in accordance with this Act.
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On Article 11 In Paragraph 1 it is described what entities registered as consignees are entitled to carry out. Consignees can therefore receive or import food on which a financial levy is required to be paid, from other countries without the tax being required to be paid on receipt or import. The provision is to be viewed in the context of Article 13 on the determination of the base amount on which tax is to be paid for the tax period/the settlement period. It is noted that a private person in another EU country who acquires food on which a financial levy is required to be paid, for his own use, and transports food himself into the country is not required to pay a levy. Private persons who import food into the country from a country outside the EU or from areas located in the EU which are not included in the EUs fiscal territory are subject to the Customs Acts luggage regulations. In Paragraph 2 it is described what an entity that is registered as a warehousekeeper can carry out, without the financial levy on food being required to be paid. The entity can produce, process, and store food on which a financial levy is not required to be paid. The entity can receive food on which a financial levy is not required to be paid from other warehousekeepers, receive or import such food from other countries, and supply food on which a financial levy is not required to be paid, to other warehousekeepers or to foreign countries (export). It is noted that a warehousekeeper registration only includes the part of production which is exported or is unfit for human consumption. On Article 12 In Paragraph 1 a provision is proposed which sets the base amount on which a financial levy is to be paid. The base amount on which tax is to be paid is the weight of saturated fat in food constituents specified in Article 1, which are used in the production of food on which a financial levy is required to be paid, which is received, imported or sold by distance selling, in this country. This means that a financial levy is to be paid on the saturated fat in the fat used in the production of, for example imported crullers. If 500 g of vegetable fat is
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used in the preparation of 100 crullers, then a financial levy should be paid on the import of the 100 crullers on the saturated fat in the 500 g of vegetable fat. If 200 crullers were prepared using this vegetable fat, then the financial levy should be paid on the saturated fat in 250 g of vegetable fat. In Paragraph 2 it is proposed that the parties liable to pay financial levies are able to document the weight of saturated fat used in the production of the food, which originates from the taxable food in Article 1 and are to be able to present a producer declaration of this. For the taxable constituents specified in Article 1(1), the average rates for the saturated fat content in meat are to however always be used, as specified in the Acts Annex 1, to set the base amount on which tax is to be paid. If The Minister for Taxation utilises the authorisation granted by Article 6(6) to set the average content of saturated fat in other taxable food than meat included by Article 1, then these can also be used to determine tax. Producers can, in the preparation of a declaration, also use the publically available food information which sets average standards for the saturated fat content in some food, to determine the base amount on which tax is to be paid on food constituents on which a financial levy is to be paid, which are used in the production of a food. In Paragraph 3 a recourse regulation is proposed which stipulates that the financial levy is to be paid on the products total fat content if the base amount on which a financial levy is to be paid can not be set using producer declarations. This means the levy is to be paid on both the saturated and unsaturated fat, or if this information cannot be provided, then the financial levy is to be paid on the foods net weight. If a financial levy is to be paid on the foods total fat content, this means that tax is to be paid on both the saturated and unsaturated fat, even though the food contains saturated fat which originates from other food than the taxable food specified in Article 1. Net weight means the foods total weight excluding packaging, but including any brine or similar. This means that a financial levy is to be paid on, for example, the weight of the pizza. On Article 13
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The provision sets how the base amount on which tax is to be paid for a tax period/settlement period is settled. In Paragraph 1 it is proposed that entities which are registered as consignees settle the base amount on which tax is to be paid for a tax period based on the weight of the saturated fat used in the production of food on which a financial levy is required to be paid, which is received or imported by the entity in the tax period. In Paragraph 2 it is proposed that entities which are registered as consignees settle the base amount on which tax is to be paid for a tax period based on the weight of the saturated fat used in the production of food on which a financial levy is required to be paid, which is delivered from the entity in the tax period. In Paragraph 3 it is proposed that entities which are registered for remote selling, settle the base amount on which tax is to be paid for a tax period based on the weight of the saturated fat used in the production of food on which a financial levy is required to be paid, which is sold by distance selling into the country in the tax period. In Paragraph 4 it is proposed that entities own consumption of food on which a financial levy is required to be paid is considered to be comparable with deliveries, which includes sales to personnel. On Article 14 Articles 14-26 are joint regulations which apply to both taxable food and food on which financial levies are required to be paid. This means that when tax is referred to in the regulations, that this includes both the ordinary fat tax on food specified in Article 1 and the financial levy on food as stipulated in Article 8. It is proposed in the provision which tax period is to apply and which regulations should apply to declaration and payment. In Paragraph 1 it is proposed that the tax period is set to the month, which is in line with the tax period stipulated in other excise duty legislation. In Paragraph 2 it is proposed that registered entities declare and settle tax at the end of each tax period. The Tax Collection Acts general regulations in Articles 2 and 3 apply to the declaration and settlement of tax in accordance with this Act. This means that a
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declaration is to be submitted to the Danish Tax and Customs Administration at the latest by the 15th of the first month after the end of the tax period. Declarations are however in January not required to be submitted until 17 January. If the submission deadline date falls on a Saturday, Sunday or public holiday, then the declaration submission deadline is extended to the next working day. Tax falls due on 1st of the month in which the declaration is to be submitted, and is to be paid at the latest by the declaration submission deadline. If a declaration shows a payment of less than DKK 50, then the payment of this amount can be omitted. Declarations are to be signed by the entitys management. The Danish Customs and Tax Administration is authorised to set more detailed regulations on declaration and payment such as practical aspects including which information is to be included in declarations and whether designated forms are required to be used etc. In Paragraph 3 it is proposed that the Tax Collection Acts general regulations in Articles 48 apply to the failure to submit declarations or make payments. The Tax Collection Act regulations specify what the Danish Tax and Customs Administration can do if the regulations on declaration and settlement are not complied with. The Danish Tax and Customs Administration can, where a declaration is not submitted by the deadline, set an estimated tax payment amount. A provisional setting costs DKK 800 and the Danish Tax and Customs Administration can withdraw the entitys fat tax registration where tax amounts are repeatedly required to be provisionally set. The Danish Tax and Customs Administration can also issue an order upon an entity, requiring it to comply with specific regulations and can impose fines upon the entity until the order is complied with. If it is established that the entity has paid too little tax, the outstanding amount is claimed from the entity and, where this cannot be established from the entitys accounts, the Danish Tax and Customs Administration can set an amount based on discretion. If the entity has not prepared accounts on which tax settlements can be based, the Danish Tax and Customs Administration can enter into an agreement with an auditor on the preparation of accounts. A fee of DKK 65 is to be paid
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in addition for the issue of reminders and interest is to be paid if the tax is not paid on-time or if extension deadlines are granted. The Danish Tax and Customs Administration can however, in special situations, exempt the entity with respect to the payment of reminder fees or the tax of DKK 800 for a provisional assessment. On Article 15 It is proposed in the provision that non-commercial consignees who receive taxable food from another EU country are to pay tax in accordance with Article 9(2) (4) of the Tax Collection Act, if the entitys distance selling to Denmark is below the amount threshold stipulated in the VAT Act Article 48(3). This means the tax is to be declared and be paid at the latest on receipt of the food, and that the declaration is to be signed by the consignee. The payment of tax can be omitted where the amount is less than DKK 50. The proposed provision is in line with other excise duty legislation. On Article 16 In Paragraph 1 it is proposed that non-commercial consignees who import taxable food from a country outside the EU or from areas located in the EU which are not included in the EUs fiscal territory are to pay the tax on import in accordance with the Customs Acts Chapter 4. In Paragraph 2 it is proposed that, in line with other excise duty legislation, tax exemptions for imported food are granted to the same extent and under similar conditions as are granted in accordance with the VAT Act Article 36(1)(1)(3). Referring to the VAT Act Article 36(1)(1) it is stipulated that a tax exemption is granted where goods are duty free in association with temporary import or duty free in association with onboard stores, etc., which are brought into the country onboard ships or aircraft arriving from locations outside of the EU or when no customs debt arises because products have been destroyed or handed over to the state or where duty free is granted for returned goods. In accordance with No 2, duty free is also granted in accordance with the EUs regulations on tax exemption on imports. Goods with a total value, in commercial shipments, of less than DKK 80 are also duty free.
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On Article 17 In Paragraph 1 and in line with other excise duty legislation, it is proposed that a registered warehousekeeper can deduct taxes on taxable food which is supplied to other registered warehousekeepers, is exported, is supplied to nonfood, to diplomats, etc., which is lost, is unusable or which is returned to the entity if the entity accepts to refund the price including VAT. In Paragraph 2 it is furthermore proposed that an entity can apply for tax refunds on goods exported or used in the production of non-food under specific conditions. The conditions proposed in Paragraph 3 are that the entity can present the required documentation for the taxable food to which refunds are applied for, that demonstrates that it originates from a taxable entity and that the entity is in possession of a invoice for the taxable food or the food on which a financial levy is required to be paid, which has been used in the production of the food. In Paragraph 4 the Danish Tax and Customs Administration is authorised to set more detailed regulations on deductions and refunds. This relates to practical aspects such as documentation that the food has been lost as a result of burglary and formal requirements relating to refund applications. On Article 18 In Paragraph 1 it is proposed that deliveries to diplomatic representations, international institutions, etc. and associated persons are in line with other taxation legislation, including tax exemptions in accordance with this Act. The group of persons and institutions included by this provision is stipulated by Article 4 of the Customs Act. In Paragraph 2, it is proposed that the Danish Tax and Customs Administration is authorised such that the Danish Tax and Customs Administration can set practical regulations relating to tax exemption, such as documentation requirements, formal requirements relating to exemption applications, etc. On Article 19 In Paragraph 1 it is proposed that registered entities are to maintain accounts that are in conformity with
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the accounts which are required to be maintained by other excise duty legislation. The entity is, as a minimum, to maintain accounts of raw materials and taxable food, intake of bonded food, transfer of bonded food to registered warehousekeepers, and its own consumption of taxable food. This means that accounts are in principle to be maintained in the entitys general business accounts and in such a way that due tax can be calculated at the end of each tax period, that number references in the accounts allow entries in the accounts to be compared with purchase and sales vouchers and any production vouchers and other internal vouchers and that the delivery to each recipient of bonded food is specified in the accounts, so that the entity is able, at the request of the Danish Tax and Customs Administration, to provide information on this. If accounts can not be incorporated in the entitys business accounts, then the entity is to maintain separate accounts in accordance with the Danish Tax and Customs Administrations instructions, which comply with the requirements stipulated in the Acts accounting regulations. In Paragraph 2 it is proposed that accounting materials are stored such that they can be accessed by the Danish Tax and Customs Administration and in line with the archiving obligation which applies through other excise duty legislation. This means that the materials are to be stored at the entity, unless it can be made accessible to the Danish Tax and Customs Administration within 5 working days. In Paragraph 3 it is proposed that accounting materials are to be archived for a period which is in line with that which applies in other excise duty legislation. This means that the materials are to be stored for 5 years after the end of the financial year. Retail stores cash register rolls and similar internal vouchers are only required to be stored for 1 year from the point in time of signing of the annual accounts. In Paragraph 4 it is proposed that The Minister for Taxation is authorised to set more detailed regulations on registered entities accounts. Electronic invoices and accounts are also included by these accounting and invoicing regulations.
In Paragraph 5 it is proposed that entities, which have in its possession food in which tax not yet been paid and food in which tax has been paid, are to keep these products separate. This is equivalent to the regulations in other excise duty legislation. The entity can however obtain the Danish Tax and Customs Administrations permission to operate other forms of warehouse storage. This relates in particular to entities which have electronically controlled warehouses and where computer controlled robots maintain control of the warehouse and where the risk of errors and intermixing of the foods is minimal. In Paragraph 6 it is proposed that registered entities which sell taxable food are to issue invoices which provide standard invoice information. This means that the invoice is to include the following information: sequential invoice number, invoice date, the sellers name, organisation number and address, the purchasers name and address, and the nature, volume, and price of the delivery. The food is invoiced at prices that include tax. It is however permitted to charge the tax via a separate item on the invoice. It is however to be clearly specified which tax this relates to and the tax rate. It is noted that, in accordance with Paragraph 7, that information on the tax is required to be submitted to a warehousekeeper who receives food without tax. In Paragraph 7 it is proposed that registered entities which supply taxable food to registered warehousekeepers are to submit with the delivery of the food, a written notification to the receiving entity of the base amount on which tax is to be paid on the food. For reference, this can be stated on the invoice. On Article 20 The provision sets the framework for the Danish Tax and Customs Administrations control which is in line with the control regulations in the other excise duty legislation. In Paragraph 1 it is proposed that the Danish Tax and Customs Administration has access to the entitys premises without a court order, to control the entity. No court order is therefore required. Proper identification is however required. the Danish Tax and Customs Administration therefore has the right to carry out inspections of premises which are used by
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the entity and to inspect stocks, books of accounts, other accounting materials and correspondence, etc. Premises can for example be shop, factory, office, and/or storage premises. Private residences are protected by Article 72 of the Constitution. There can however be borderline cases, such as where a private residence is used in association with the operation of a taxable entity. The Danish Tax and Customs Administration also has the right of access in these cases. The Danish Tax and Customs Administrations access to control entities includes also parties which the Danish Tax and Customs Administration has evidence or a well grounded suspicion that a party is operating an unregistered entity. The inspection right includes all accounting materials. In Paragraph 2 it is proposed that the entitys owners and employees are obliged to assist the Danish Tax and Customs Administration with their controls. This means that they are obliged to give an account of the business circumstances which the Danish Tax and Customs Administration finds necessary to use in controls. In Paragraph 3 it is proposed that the entity has an obligation to hand over or submit accounting materials, etc. to the Danish Tax and Customs Administration. It is, with respect to this, irrelevant that such materials are being held by a third party and that third party has the right to withhold these materials. Materials received from a third party are returned to the third party after the inspection has been completed. In Paragraph 4 it is proposed that entities which supply products or packaging for production of taxable food are obliged to provide information to the Danish Tax and Customs Administration on request. This provision is proposed to provide the Danish Tax and Customs Administration with the opportunity to obtain an overview of the entitys taxable activities through other channels than through the entitys own accounting materials. This control is a crosscheck. This could, for example, relate to be the deliveries of living animals to an abattoir from a pork farmer or the deliveries of plastic trays by a packaging entity for the packaging of food.
In Paragraph 5 it is proposed that entities are obliged to notify of their purchases of taxable food to the entity. The basis for this is the same as stated above in Paragraph 4. In Paragraph 6 it is proposed to provide the Danish Customs and Tax Administration with access to carry out inspections of taxable food in transit, when the products are commercially sold from other countries or commercially transported to parties other than registered entities. In Paragraph 7 it is proposed that the Danish Tax and Customs Administration also has the right to access materials cf. Paragraph 1, that are found on electronic media. In Paragraph 8 it is proposed that the Police should assist the Danish Tax and Customs Administration in controls and in accordance with the agreement between the two relevant departments. There are no such formal regulations existing today. The provision provides the Danish Tax and Customs Administration with the opportunity to ask the Police for assistance with controls. The assistance the Police provide in accordance with this provision only includes assistance with overcoming physical barriers to the implementation of controls and it is the local chief constable who decides whether the Police should assist the Danish Tax and Customs Administration. On Article 21 Public authorities are obliged to provide information to the Danish Tax and Customs Administration for use in their registration of and control of taxable entities. On Article 22 In Paragraph 1 regulations are proposed on the penalty for intentional or grossly negligent violation of more specific situations: No 1. Submitting incorrect or misleading information or concealing information used in tax inspections, No 2. Violating the obligation to register a taxable entity either with respect to the general fat tax or the financial levy, violating the obligation to declare and settle the tax in accordance with The Tax Collection Acts regulations, irrespective of whether this is taxable entity or a non-commercial consignee,
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violating the invoicing and accounting regulations and the obligation to assist the Danish Tax and Customs Administration during controls through providing the requested information and handing over/submitting requested materials. No 3. Transferring, acquiring, obtaining or using food on which tax has not been paid in accordance with this Act or attempts of this. In Paragraph 2 it is proposed that fines can be imposed for intentional or grossly negligent violation of regulations issued in pursuance of the Act. In Paragraph 3 it is proposed that if one of the specified violations is intentionally committed to avoid paying tax, that the penalty framework is set to be fines or imprisonment for up to 1 year and 6 months, unless higher penalties are stipulated by Article 289 of the Penal Code. In Paragraph 4 it is proposed that an entity can be deemed to bear a criminal liability in accordance with the regulations in Chapter 5 of the Penal Code. On Article 23 The Tax Collection Acts Articles 18 and 19 apply in line with that which applies in other excise duty legislation. This means that a violation that does not result in a higher penalty than a fine can be executed administratively without legal proceedings, if the party concerned acknowledges their guilt and pays the set fine. There will be no further proceedings if the fine is paid or is collected or a prison term is served. Fines are collected in accordance with the Danish Tax and Customs Administrations general regulations, which means that retention of pay and distraint can be carried out. The Administration of Justice Acts regulations on indictment apply to cases which are executed administratively. The Danish Tax and Customs Administration can furthermore impose fines on the owner of an entity or the management, which are to be a minimum of DKK 1 000 per day, for the failure to comply with orders issued in accordance with Article 4a of The Tax Collection Act.
Searches can be carried out in cases relating to violation of this Act in accordance with the Administration of Justice Act. On Article 24 Those who transfer, obtain, acquire or use taxable food on which tax has not been paid in accordance with this Act, are to pay tax on the food. Refer to SKM2004. 475. LR. On Article 25 Articles 11-13 of the Tax Collection Act similarly apply to this Act and in line with similar regulations in other excise duty legislation. Article 11 of The Tax Collection Act relates to regulations on the provision of security. In accordance with these regulations, the Danish Tax and Customs Administration can require that an entity provides security when specific conditions are complied with. Article 12 of The Tax Collection Act relates to regulations on payment of negative tax liabilities. In accordance with these regulations, negative amounts are repaid and entities that have paid too much or claim a refund, receive these amounts. Amounts of less than DKK 50 are not paid. Payment takes place, under normal circumstances, at the latest 3 weeks after a declaration has been received or reporting for the relevant period has been submitted. Article 13 of the Tax Collection Act states that claims for repayment of negative tax liabilities can not be paid out before the end of the tax period which the claim relates to. On Article 26 The regulation sets transition and entry into force provisions, etc. In Paragraph 1 it is proposed that the Act enters into force on 1 July 2011. The Act comes into effect at different points in time as the tax is paid at different points in time depending on the entitys registration. In Paragraph 2 it is proposed the Act comes into effect for entities which are registered as warehousekeepers, for taxable food which is supplied by the entity on 1 July 2011 or later. The Act comes into effect for entities which are registered as a consignee or for their distance selling,
AN010596
Skattemin., j.nr. 2010-231-0038
THE FOLKETING
Draft Act No L 111
for taxable food which is received or is imported from other countries or is sold by distance selling into this country on 1 July 2011 or later. In Paragraph 3 it is proposed that the Act comes into effect for non-commercial taxable parties who receive or import taxable food from other countries, for food which is received or is imported into the country on 1 July 2011 or later. In Paragraph 4 it is proposed that Article 28 applies to goods which, after the Act enters into force, are supplied for consumption by registered entities, are declared for customs clearance or are imported. In Paragraph 5 it is proposed that entities that are required to register are to notify registration at the latest by 1 July 2011. On Article 27 The provision contains consequence amendments in the Tax Collection Act. The Tax Collection Act refers to an Annex of the Act (list A) which contains a list of tax legislation which the Tax Collection Act regulates. The Act on a Tax on Saturated Fat in Specific Food (the Fat Tax Act) is added to this list. On Article 28
The Wine Tax on wine in class 2 is raised by 73 cents from DKK 6.14 to DKK 6.87. The additional levy on wine based alcohol contents is reduced by 73 cents from DKK 15 to DKK 14.27. On Article 29 The act does not apply to the Faroe Islands and Greenland. To Annex 1 The Annex contains rates for the average saturated fat content in the listed meat types. In addition to the common meat types such as beef, pork, horse, mutton, goat, poultry, and game, is also included a collective regulation for rarer meat types such as kangaroo, crocodile, and snake. The Annex is to, in principle, be used to set the base amount on which tax is to be paid on meat, when this relates to raw meat. Referencing Article 6(3) and Article 12(2), the taxable party can however choose to set the base amount on which tax is to be paid on the cut level using the Food Composition Databank or specific measurements of the saturated fat content in the cuts. The Annexs average rates are to be used for meat included as a constituent in a composite food.
AN010596 Skattemin., j.nr. 2010-231-0038

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Beef, minced, 15 % fat Beef, minced 7 %. fat

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