Value-added taxes play a crucial role in influencing consumer behavior when it comes to purchasing food items. Recent research conducted by Dr. Marco Springmann from the University of Oxford and Dr. Florian Freund from the ThĂĽnen-Institute for Market Analysis suggests that implementing a tax system with no VAT on fruit and vegetables, but increased VAT on meat and milk, could have a positive impact on diet-related diseases, the environment, consumption patterns, and tax revenues.
The study, published in Nature Food, indicates that reducing VAT on plant-based products while simultaneously increasing VAT on animal-based products could lead to significant benefits. In Europe, such a tax reform could result in a 6% reduction in environmental impact, with countries like Germany potentially emitting about 10 million tons less carbon dioxide. Additionally, there could be 330 fewer diet-related deaths per 1 million people across Europe, with 20,000 fewer deaths in Germany alone. 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 about 6 billion US dollars in Germany.
Dr. Freund emphasizes the importance of aligning economic, environmental, and health goals through VAT adjustments. Lower taxes on plant-based products could improve overall nutrition and health outcomes, while higher taxes on animal-based products would benefit the environment and tax revenues. Dr. Springmann suggests that if implementing a more targeted tax like a CO2 tax proves challenging, reforming VAT could serve as a simpler way to promote sustainable food systems.
The research also highlights the significant variation in VAT rates on food items across European countries. While the average VAT rate is 8% for meat and milk and 9% for fruits and vegetables, individual countries have differing tax structures. For instance, the United Kingdom imposes minimal taxes on food, whereas Denmark taxes food at a high rate of 25%. In Germany, plant-based foods are taxed at just under 9%, slightly higher than the 7% tax rate on animal-based foods. Discussions on VAT reform have already taken place at the political level in Germany, but no official approval has been granted yet.
Overall, the study underscores the potential of VAT adjustments as a lever for promoting healthier, more sustainable diets. By reshaping tax policies to incentivize the consumption of plant-based products over animal-based products, countries could make significant strides towards addressing key societal and environmental challenges.
