September 9, 2011 10:16 pm

French lessons in taking on fizzy drinks brigade

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Having resisted a US-style tax protest, France will get a US-style tax

Even if Coca-Cola symbolises the American Way, it was still a shock this week when the company’s European bottler, Coca-Cola Enterprises, tried to introduce France to the American Way of budget politics. Prime minister François Fillon laid out an austerity budget in late August. It included a surcharge on incomes of more than €500,000, a 6 per cent tobacco hike and – the bone of contention – a €4.30 per hectolitre tax on soft drinks. The government explained that this last measure would not only raise €120m but also slim down the average Frenchman, who has put on about 3kg since 1997. The budget left almost everyone in France with something to grouse about. But only CCE chose the American path of all-out tax revolt, complete with a public-relations campaign and a Twitter feed.

Though the tax would have raised the price of a can of Coke by only about a cent, CCE stood on principle. It suspended plans, scheduled for mid-month, for a €17m expansion of its plant in Bouches-du-Rhône. “In this way,” the company announced, “we believe we are protesting symbolically against a tax that sanctions our business and stigmatises our products.” Such tactics sometimes work in the US. In several municipalities, Walmart has circumvented hostile city council regulations by organising referendums to overturn them. Amazon.com is playing carrot-and-stick with California legislators, promising to open job-rich facilities if they repeal an online sales tax. But the French national assembly takes a dim view of a single private company that presumes to negotiate on equal terms with the representatives of the sovereign people. Two prominent members of the governing UMP party called CCE’s move “blackmail”. By Thursday evening, CCE’s president, Hubert Patricot, was affirming his commitment to France announcing he regretted the “communication error” made earlier in the day.

So having resisted a clumsy, American-style tax protest, France will now get a clumsy, American-style tax. Since the 1990s Republican flat taxes have provoked fascinating theoretical discussions. But it is Democrats’ fat taxes that have got enacted. Particularly since Michelle Obama made obesity her signature issue, school pizza parties have been banned in Washington DC and school lunches have become ordeals of inedible brown “wheat pasta”. One would think it would be bad politics to classify many of your electorate as disgustingly fat, but that has not deterred anti-obesity activists. Soft drinks are banned from most school premises and taxed in 40 states.

The case for a government sugary-drinks policy is stronger in the US than France. Statistics on US consumption vary widely. Some run towards 200 litres per capita per year, about six times as much of the glop as French people ingest. But taxes on sweets can be fickle. Katherine Mangu-Ward of Reason magazine has noted that in the states of Colorado and Washington, a Hershey bar is classified as a candy and taxed, while a Kit Kat, because it contains flour, is a “food” and tax-free.

The experience of the US since the passage of a big tobacco lawsuit a decade ago is that the government grows addicted to “sin tax” revenue. The (unfulfilled) promise of high taxes on gambling has led to a corrupt process in which states grant casino monopolies to big campaign contributors. Once the government starts making money off people’s sins, it begins scavenging for new things to classify as sins. Any stigmatised product becomes a cash cow. CCE executives were quite right to worry about the consequences of being “unjustly associated with products like alcohol and tobacco”. It must have been frustrating to hear business ignoramuses in the National Assembly argue that, if the company doesn’t like the sugar tax, well, then, it should just sell more sugar-free drinks.

Why, then, did CCE have to reverse course? Because, having been drawn into the game of showing itself a good “corporate citizen”, it overplayed its hand. Ninety per cent of French households consume “refreshing beverages or fruit juices” and the company employs 3,000 people at five sites. When you do the maths, though, this is not many jobs in exchange for market share – about one for every 18,000 potential French soft-drink consumers.

During the long reign of social democracy, which lasted from roughly the 1930s until George Osborne’s austerity and Barack Obama’s implosion, too little attention was given to job-creators. Today the pendulum has swung too far the other way. Any business with even a partway credible plan to create a modest number of jobs behaves as if it deserves a medal. CCE’s modest contribution to job creation should be noted. But the company was right to see it had blundered badly in insisting on a privileged negotiating position with the state.

The writer is a senior editor at The Weekly Standard

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