Value-added taxes could promote healthier, more sustainable diets

No value added tax (VAT) on fruit and vegetables, but a higher VAT on meat and milk would have a positive impact on diet-related diseases, the environment, consumption and tax revenues, because food prices influence our purchasing behavior. This is the conclusion of research led by Dr. Marco Springmann, scientist at the University of Oxford, and Dr. Florian Freund, researcher at the Thünen Institute for Market Analysis.

The study is published in Natural food.

Lowering VAT on plant products and simultaneously increasing VAT on animal products promises the most success. The expected consequences for Europe: The impact on the environment would decrease by 6% – for example, Germany would emit around 10 million tons less carbon dioxide. This roughly corresponds to Latvia’s annual emissions. In addition, there would be 330 fewer diet-related deaths per 1 million people.

In Germany there would be 20,000 fewer deaths. Tax revenues would increase by $46 billion, in Germany by about $7 billion. The costs to society from diseases and climate damage would fall by $37 billion, in Germany by about $6 billion. “To minimize conflicting objectives between the economy, the environment and human health, VAT should be adjusted for both product groups, if possible,” says Dr. Freund.

An adjusted VAT would be a step towards more sustainable food systems. Lower taxes on plant products would improve the nutrition and health of the population. The environment and tax revenues would benefit from higher taxed animal products. “If a more targeted tax like the CO₂tax cannot be introduced, VAT reform could be an easier way to make food systems more sustainable,” says Dr. Springmann.

The European average VAT rate is 8% for meat and milk and 9% for fruit and vegetables. However, tax rates vary widely from country to country. While food is hardly taxed in Great Britain, in Denmark it is taxed at 25%.

More than half of the countries surveyed apply similarly high taxes on animal and plant products. In fact, more than a third of countries impose significantly higher taxes on plant-based products. In Germany, VAT on plant-based food is also just under 9% and therefore higher than on animal food, where a 7% tax is levied. A VAT reform has already been discussed at political level in Germany, but has not yet been approved.

Provided by Johann Heinrich von Thünen-Institut, Federal Research Institute for Rural Environment, Forest and Fischerei