Spain has recently eliminated the food VAT, and Coop’s CEO has also suggested a similar proposal to the Minister of Finance. Meanwhile, in Sweden, the Green Party has pushed for a temporary reduction, which has received partial support from the Left Party. Ali Esbati, spokesperson for economic policy, believes that it would be beneficial to reduce the food VAT now, as long as food stores lower their prices by the same amount. During the 90s crisis, the VAT on food was lowered from 25 to 12 percent to support families with children and low-income earners. However, investigations from the National Audit Office and the Ministry of Finance indicate that this is an expensive way to benefit weaker households, and that high-income earners receive greater tax breaks from it. The majority of right-wing parties, the Center Party, and the Social Democrats in the Riksdag are against the proposal, while the MP’s version suggests temporarily abolishing the VAT on basic foods for low-income households. Although Per Bolund of the MP acknowledges that high-income earners would benefit from the reduction, he believes that broad solutions are necessary to help families facing financial difficulties. Daniel Waldenström, a professor and researcher in taxes and equality, argues that reducing food VAT is not an effective way to assist the poorest and should not be prioritized.
Spain has already removed the food VAT and Coop’s CEO raised the proposal in the meeting with the Minister of Finance. In Sweden, the Green Party has advocated a temporary reduction and is partially supported by the Left Party.
– We think it would be good to lower the food VAT now, if at the same time you can monitor so that the food stores really lower the food prices by the same amount, says Ali Esbati, spokesperson for economic policy.
During the 90s crisis, VAT on food was reduced from 25 to 12 percent. The purpose was to support “families with children and low-income earners”. According to Statistics Norway’s statistics, low-income earners spend a greater proportion of their income on food.
Mostly to the rich
Investigations from both the National Audit Office and the Ministry of Finance have pointed out that it is an expensive way to benefit weak households with poor accuracy. The measure may benefit everyone, but high-income earners buy more expensive food and receive greater tax breaks.
A kilo of potatoes would today be 1.6 kroner cheaper, the falu sausage 6 kroner and a kilo of beef fillet would drop by 54 kroner.
For every billion in reduced VAT that goes to low-income earners, two billion goes to high-income earners, FI’s calculation shows.
– Dropped food VAT is not a good way to help the poorest and not something we should prioritize now if we want to help vulnerable households, says Daniel Waldenström, professor and researcher in taxes and equality at the Institute for Business Research.
Majority against the proposal
The trade union think tank Katalys has also raised the demand for reduced food VAT. In the Riksdag, all right-wing parties, as well as the Center Party and the Social Democrats, give the thumbs down. In the MP’s version, the VAT, as in Spain, would be temporarily abolished on basic foods such as milk, cheese, bread, fruit and vegetables.
Per Bolund (MP) agrees that high-income earners would receive a large part of the price reduction, but defends “broad solutions” as temporary measures.
– The important thing is to help families with children and others who are having a tough time and food is an expense that no one can escape.