From the point of view of the Federal Environment Agency (UBA), fruit, vegetables and grain should be completely exempt from VAT.
(Photo: dpa)
Berlin The debate about high food prices is moving. The Federal Environment Agency and the Federation of Consumer Organizations (VZBV) support the demand by Agriculture Minister Cem Özdemir (Greens) for the abolition of VAT on certain foods.
“The VAT exemption for plant-based food counteracts the high price increase for food,” said UBA President Dirk Messner to the Handelsblatt. “It should be implemented as quickly as possible, because everyone in Germany should be able to afford a healthy and at the same time climate-friendly diet.”
VZBV boss Ramona Pop also sees a need for action. “The abolition of VAT on fruit, vegetables and legumes is long overdue in order to relieve the wallet in times of high prices and also provide incentives for a healthier diet,” Pop told the Handelsblatt. “In a rich country like Germany, a healthy, varied and sustainable diet shouldn’t be a question of money.”
In the newspapers of the Funke media group, Özdemir had shown “great sympathy” for “setting the VAT for fruit, vegetables and legumes to zero”. “That would also send the signal that healthy eating is cheaper,” said the minister. He also emphasized that good nutrition should not fail because of money.
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The reason for the discussion is the fact that life in Germany has skyrocketed in price since the start of the Ukraine war. According to the Federal Statistical Office, food prices increased by 21.1 percent in November 2022 compared to the same month last year. The price increase was more than twice as high as the overall inflation, which was ten percent.
Relief of around four billion euros per year possible
There were price increases for all food groups: according to the statisticians, edible fats and edible oils became significantly more expensive (plus 41.5 percent), while there were also clearly noticeable increases in dairy products and eggs (plus 34.0 percent), bread and cereal products (plus 21.1 percent) and vegetables (plus 20.1 percent).
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For the time being, Özdemir does not expect food prices to relax. The forecasts assumed that the inflation rate would fall, but it was still at a level that was too high. The Green politician therefore sees a possible lever to provide relief in the sales tax law.
There it is regulated for which products the reduced rate of seven instead of 19 percent sales tax is levied. The seven percent apply to foods such as meat, fish, fruit, vegetables, flour, baked goods or oils. But firewood, newspapers, books, sheet music, prostheses or works of art are also subject to the reduced tax rate.
With regard to VAT, UBA President Messner spoke of a “proliferation of individual regulations” in which ecological concerns were hardly taken into account and social concerns only partially taken into account. “A VAT exemption for fruit, vegetables, grain products and vegetable oils would save private households around four billion euros a year, according to an initial estimate,” calculated the head of the authority. Low-income households would benefit the most.
The tax exemptions have already been implemented in Poland and Spain
Changes to the status quo would be possible under EU law after the so-called EU Value Added Tax System Directive came into force last year. The regular tax rate must therefore be at least 15 percent, and the reduced rate must be at least five percent.
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Complete tax exemptions are only possible in certain areas – and since the change, this also applies to food and other goods to cover basic needs.
The tax exemption for food is already being practiced in other European countries. In Spain, for example, the left-wing Spanish government decided in December on a new program to alleviate the social consequences of the Ukraine war.
Among other things, the plan is to waive VAT on basic foods and reduce vegetable oil and pasta to five percent during the first six months of 2023 – tailored primarily to families in need.
The Polish government extended the suspension of VAT on groceries in November. Prime Minister Mateusz Morawiecki said at the time that the regulation that has been in force since February 1, 2022 will be retained for at least the first half of next year.
More: “Large-scale tax evasion”: Expert warns against ecological VAT reform