Do International Trade and Human Rights Law Allow “Fat Taxes”?

Alicia McCaffrey, Vol. 37 Associate Editor

Many in the U.S. remember the controversy that ensued when Mayor Michael Bloomberg attempted to enact a ban on the sale of large containers of soda in New York City.[1] While the national response was rather negative (and in fact a New York state judge later overruled the regulation[2]), the proposed ban would not have been unusual in the international context. Several countries, most of which are European, have enacted similar regulations with varying degrees of success.[3] This article examines whether these kinds of “Fat Taxes” are in accordance with international law. Rather than ban the sale of unhealthy foods or drinks, the European regulations tend to tax unhealthy foods. For example, in 2011 Denmark enacted a tax that charged 16 kroner per kilogram of saturated fat (imagine that in the U.S. the price of butter rose by 37 cents).[4] However, the tax was repealed the following year because the government considered it ineffective.[5] The government claimed that citizens simply went across the border to buy foods high in saturated fat and that, because the tax was charged to food manufacturers in hopes the businesses would pass the cost along to the consumer, the tax caused too many administrative problems.[6] Other more successful examples exist. In 2012, France enacted a tax of $0.36 per gallon ($0.22 per can) on drinks with added sugar or artificial sweeteners.[7]  The next year, the French parliament voted to tax energy drinks as well (€1 per liter on drinks containing certain amounts of caffeine or taurine).[8] Finland and Hungary have also enacted similar taxes.[9] Arguably, if the Fat Taxes are substantial enough, they can successfully raise revenue and encourage a healthier diet.[10] It is at first unclear whether these taxes comply with international law. The provisions in international law that potentially cause problems are those that prohibit a country from instituting taxes that apply to foreign products but not to similar domestic products. The EU and the WTO both have provisions like this. For countries that are members of the EU, the Treaty on the Functioning of the European Union (“TFEU”) states in Article 110 that:

  • No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
  • Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.[11]

“Similar products” is generally interpreted broadly to include “products at the same stage of production or marketing that have similar characteristics and meet the same need from the point of view of consumers.”[12] This is a problem because with Fat Taxes, “similar products” (that differ only in fat content) are taxed differently. Additionally, Article 110 states that even an indirect effect of greater taxes for foreign products is a violation. Thus, courts can take into account not just one specific tax, but the aggregate effect of all taxes imposed on foreign products by a state.[13] Despite these concerns, however, the European Commission indicated that both the Danish and Hungarian taxes were permissible under TFEU.[14] The GATT test creates similar but more serious concerns for these kinds of taxes. The WTO’s General Agreement on Tariffs and Trade (“GATT”) states in Article III.2  that:

[t]he products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1.[15]

GATT Article III.2 uses a two-fold test. According to the first sentence the tax will fail when (1) the domestic and imported products are like products and (2) the imported items are taxed more than the domestic items. Regarding “the principles set forth in paragraph 1” (the second sentence) determining whether two products are like products under GATT Article III.2, the analysis considers, amongst other factors, whether the products are “in competition” with one another.[16] The GATT standard is more stringent than the TFEU standard. While the “like products” of the first sentence in GATT is construed narrowly, whether products are “in competition” (relevant to the second sentence of GATT) is construed more broadly.[17] To determine whether products are “in competition,” courts need not even consider individual items but only groups of items.[18] This is a broader and more difficult standard than the “similar products” test of the TFEU.[19] Again, this causes problems about whether products “in competition” are being taxed differently.  For example, under the Danish Fat Tax, whole chickens are taxed while chicken tenderloin is not because whole chickens have much more saturated fats than chicken tenderloin.[20] However, the products are clearly in competition. Again though, despite these concerns, it is unlikely that in practice the WTO would consider the Danish tax (or other similar taxes) a violation of the GATT because the purpose is clearly not to discourage imports.[21] Because these taxes are likely in accordance with EU and WTO law, one can approach the normative question of whether countries should implement taxes like this in order to encourage a healthier lifestyle among their citizens. It may be useful to view the issue through a human rights lens: is it a human right to be provided with the tools necessary in order to live healthily? Article 12 of the International Covenant on Economic, Social and Cultural Rights states:

(1) The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. (2) The steps to be taken by the States Parties to the present Covenant to achieve the full realization of this right shall include those necessary for: (a) The provision for the reduction of the stillbirth-rate and of infant mortality and for the healthy development of the child; (b) The improvement of all aspects of environmental and industrial hygiene; (c) The prevention, treatment and control of epidemic, endemic, occupational and other diseases; (d) The creation of conditions which would assure to all medical service and medical attention in the event of sickness.[22]

Clearly these kinds of taxes are passed to help citizens enjoy the “highest attainable standard of physical . . . health.”[23] While this might look very different in developed countries than it would in developing countries, they share the goal of promoting health. The taxes could also fit into subsections (a) and (c) of section 2: they contribute to the healthy development of children and they prevent diseases associated with being overweight or obese. These taxes work to achieve widely recognized human rights goals. This is no clear answer to the question, however. There is also the concern about individual autonomy. Article 1 to the International Covenant on Civil and Political Rights states that

  1. All peoples have the right of self-determination. By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development.[24]

Certainly people should be able to decide their own actions within reasonable limits. Taxing unhealthy foods in order to encourage people to make healthier decisions about food some might consider to be too paternalistic. In order to determine whether states should implement fat taxes, there must be a discussion about the limits of human rights to health and to autonomy. Despite potential international tax concerns, international courts have held, and likely will continue to hold, that taxes on unhealthy foods conform to the international trade regulations in the WTO and the TFEU. More importantly, taxes on unhealthy foods contribute to achieving widely recognized human rights goals. There are of course several other potential legal issues to be decided (Is there a more specific way to determine which products are “similar” or “in competition”? In practice, how do these laws affect foreign imports?), and there are also many more discussions to be had about how best to realize human rights. However, at least from an initial examination, it seems that taxes on unhealthy foods might be a valid approach to improving citizens’ health.

[1] Michael M. Grynbaum, Judge Blocks New York City’s Limits on Big Sugary Drinks, NY Times (March 11, 2013), [2] Id. [3] See, e.g., Olga Khazan, What the World Can Learn from Denmark’s Failed Fat Tax, Washington Post (Nov. 11, 2012),; Suzanne Daley, Hungary Tries a Dash of Taxes to Promote Healthier Eating Habits, NY Times (March 2, 2013),; Sarah Boseley, Mexican Soda Tax Cuts Sales of Sugary Soft Drinks by 6% in First Year, The Guardian (June 18, 2015), [4] Olga Khazan, What the World Can Learn from Denmark’s Failed ‘Fat Tax,’ Washington Post (Nov. 11, 2012), [5] Id. [6] Id. [7]USDA Foreign Agricultural Service, Global Agricultural Information Network Report No. FR9077: France to Tax Soft Drinks – U.S. Companies to Pay the Most (Oct. 26, 2011), [8] Id. [9] Euractiv, ‘Fat Taxes’ Do Work, EU Report Finds (July 30, 2014, at 9:07 AM), [10] Id; Denis Campbell, ‘Fat Tax’ on Unhealthy Food Must Raise Prices by 20% to have Effect, Says Study, The Guardian (May 15, 2012), [11] Consolidated Version of the Treaty on the Functioning of the European Union art. 110, 2008 O.J. C 115/47, at 47 [hereinafter TFEU], [12] Id. [13] Almanno, , Alberto & Ignacio Carreno, ’Fat Taxes’ in Europe and Beyond- A Legal and Policy Analysis under EU and WTO Law, 2 European Food and Feed L.Rev. 97, 104(2013). [14] Almanno, supra note 13, at 104. [15] GATT 1994: General Agreement on Tariffs and Trade 1994 art. III.2, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, THE LEGAL TEXTS: THE RESULTS OF THE URUGUAY ROUND OF MULTILATERAL TRADE NEGOTIATIONS 17 (1999), 1867 U.N.T.S. 187, 33 I.L.M. 1153 (1994) [hereinafter GATT 1994]. [16] Id. [17] Almanno, supra note 13, at 108. [18] Korea-Alcohol, Appellate Body Report, WT/DS75/AB/R, WT/DS84/AB/R, 17 February 1999, para. 142. [19] TFEU, supra note 11 art. 110(1), 2008 O.J. C 115 at 47. [20] See Almanno, supra note 13, at 108. [21] Id. [22] International Covenant on Economic, Social and Cultural Rights art. 12, Dec. 16, 1966, S. Treaty Doc. No. 95-19, 6 I.L.M. 360 (1967), 993 U.N.T.S. 3. [23] Id. at art. 12(1). [24] International Covenant on Civil and Political Rights art. I, Dec. 16, 1966, S. Treaty Doc. No. 95-20, 6 I.L.M. 368 (1967), 999 U.N.T.S. 171.