A number of issues in the press the last week caught my eye around the subject of taxes.

We start with the news out of Denmark that the government there has announced the removal of the world’s first “fat tax”. Adopted a little over a year ago the tax involved a surcharge on products with more than 2.3% saturated fat. A proposed tax on sugar was also abandoned.

Apparently the government and tax authorities had realised that the fat tax had inflated food prices and put Danish jobs at risk, mainly through an increase in Danes shopping abroad for these products (and no doubt others). It is not much of a surprise that if you impose a tax then prices may well rise, nor is it a surprise that in a connected country people will exercise choice. Minimum alcohol pricing and the Scotland/England border springs readily to mind.

But it does demonstrate the problems in trying to change behaviours through tax and other regimes. I have no idea from what I read whether the fat tax has improved the health of Danes, but it seems that if it has, then the impact on prices and jobs  – perhaps only in the current recession? – is more important to politicians. Again not much of a surprise perhaps.

In Scotland the headlines over the weekend about Sainsbury’s removing cigarettes from six more of their stores also was no surprise to those who read our earlier postings on the issue. I am a little surprised it took so long and has not been more widespread.

The reasoning behind the move is that the Scottish so-called health levy charged on high rateable value stores selling alcohol AND tobacco products may be higher than the profit made from the sale of cigarettes. Remove the cigarettes and make more money, seems to be the case.

So everyone wins? Well not quite. The retailer may save some money and make more profit in these stores. The Government has managed to reduce the number of points of sale for tobacco. Smokers can probably find somewhere else to get their ciggies. But on the flip side, the health levy was in many people’s views a fix to fill a hole in the budget. So its aim to raise £30m per annum has now been dented.

In the case of these six stores (Drumchapel, Garthdee, Saltcoats, Hamilton, Livingston and Leven) we estimate the health levy (tax) that will now not be paid by Sainsbury comes out at over £700, 000.  This is slightly under the average estimate per store (there are c240 involved) across Scotland (£125,000) and demonstrates the complex calculations that retailers may be doing on a store by store basis. But if more stores follow suit then there will be a hole in the budget estimates for the Government. This is not critical with six stores but add a few more and things begin to get more serious.

It may also presage other developments. One of the stores at least has a petrol filling station and moving cigarette sales to what may be a separate rateable value property may reduce the tax yet keep the sales. Are we likely to see more small kiosks selling cigarettes as a consequence? If the government gets its way in court then vending machines will be out, but other options may come into play.

So, swings and roundabouts on the tax front – and that’s not even starting on the removal of some of the empty property rates relief on shops. Answers to who wins and who loses and what the impact may be on this are open to debate.