Value-added taxes play a significant role in shaping consumer behavior when it comes to food purchase decisions. According to a recent study led by Dr. Marco Springmann from the University of Oxford and Dr. Florian Freund from the Thünen-Institute for Market Analysis, implementing a strategy of reducing VAT on fruit and vegetables while increasing VAT on meat and milk could have a positive impact on diet-related diseases, the environment, consumption patterns, and tax revenues.
The research, published in Nature Food, projects that such a tax adjustment could lead to a 6% reduction in environmental impact in Europe. For instance, Germany could potentially emit 10 million tons less carbon dioxide, equivalent to the annual emissions of Latvia. Additionally, there would be a significant decrease of 330 diet-related deaths per 1 million people across Europe, with 20,000 fewer deaths in Germany alone. The tax revenues would see a substantial increase of 46 billion US dollars at the European level, with Germany benefiting by about seven billion US dollars. Moreover, the costs associated with diseases and climate damage would decrease by 37 billion US dollars in Europe and around 6 billion US dollars in Germany.
Dr. Freund emphasizes the importance of aligning economic, environmental, and health goals through VAT adjustments on food products. Lower taxes on plant-based items could lead to improved nutrition and health outcomes for the population, while higher taxes on animal-based products would benefit the environment and increase tax revenues. Dr. Springmann suggests that if a targeted tax like a CO2-tax is challenging to implement, reforming VAT could be a more straightforward approach to promoting sustainable food systems.
The study also highlights the variations in VAT rates across European countries, with the average rate for meat and milk at 8% and for fruit and vegetables at 9%. While some countries have minimal taxes on food like the United Kingdom, Denmark imposes a tax rate of 25%. In Germany, plant-based foods are taxed at just under 9%, higher than the 7% tax on animal-based products. Discussions about VAT reform have already taken place in Germany but await approval.
In conclusion, adjusting value-added taxes on food products could be a crucial step towards creating more sustainable food systems. By incentivizing healthier and more environmentally friendly food choices through tax policies, countries can potentially improve public health, reduce environmental impact, and generate additional tax revenues. The study underscores the need for policymakers to consider VAT reforms as a strategic lever for promoting healthier and more sustainable diets.
