The fat tax has been widely blamed for costing food manufacturing jobs and driving Danish consumers to cross the Danish/German border to stock up on tax-free foods.
Tax was applied at the rate of £1.70 (16 Krone) per kg of saturated fat on a range of food products including butter, milk, pizzas, oils, meats and pre-cooked foods.
From the beginning of next year the government had planned to tax sugar in products such as confectionery, yogurts and jams.
The plans were revealed on Tuesday August 28 as part of the Danish government’s budget proposals.
A spokesman for the the Danish Food & Allied Workers Union (NNF) told FoodManufacture.co.uk: “We are delighted that the government is abandoning the fat tax and dropping plans to introduce the sugar tax.”
“Several firms – including chocolate maker Toms – had complained that the fat tax had led to lower sales, which had forced them to cut their workforce.
"We hope now that jobs will be saved.”
The government’s decision follows a campaign by food manufacturers and unions to raise awareness of how the fat tax was hurting business. NNF had joined forces with the Danish union HK Commerce to place adverts in the national press in June calling for the taxes to be removed.
Revenues lost by dropping the taxes might be recouped by raising the bottom tax rate or bundskat to 4.64%, reported The Copenhagen Post earlier this week.
That represents a rise of 0.3% levied on any income above the personal allowance of £4,566 (Kr42,900), after deducting the amount of gross taxes already paid.
Tax minister Thor Moger Pedersen said: “We have previously proposed raising the bundskat rate and it is still a possibility.
“We are ready to discuss the financing with those parties that are willing to take responsibility for removing the fat and sugar levies.”
Tam Fry, spokesman for the National Obesity Forum, told FoodManufacture.co.uk that the Danish experience showed that only mandatory controls on saturated, sugar and salt would prove effective in reducing consumption.
“The Danes have tried it. They have found the water too hot and given up. The clear message for the UK is that it is time for the government to get tough with food manufacturers and impose maximum acceptable levels of saturated fat, sugar and salt.”
Fry, who is also chair of the Child Growth Foundation, said the government should tell manufacturers: “Stick to acceptable levels or we will clobber you.”