Value-added taxes (VAT) play a crucial role in shaping consumer behavior when it comes to food choices. Recent research conducted by Dr. Marco Springmann from the University of Oxford and Dr. Florian Freund from the Thünen-Institute for Market Analysis suggests that implementing a VAT system that reduces taxes on plant-based products while increasing taxes on animal-based products could have a significant impact on diet-related diseases, the environment, consumption patterns, and tax revenues.
According to the study published in Nature Food, such a VAT adjustment could lead to a 6% decrease in environmental impact in Europe. For example, Germany could potentially reduce carbon dioxide emissions by approximately 10 million tons, equivalent to the annual emissions of a country like Latvia. Additionally, there could be 330 fewer diet-related deaths per 1 million people across Europe, with 20,000 fewer deaths in Germany alone.
From an economic perspective, the implementation of adjusted VAT rates could result in a significant increase in tax revenues. The study projects a $46 billion increase in tax revenues for Europe, with Germany seeing a boost of about $7 billion. Furthermore, the costs associated with diet-related diseases and climate damage could decrease by $37 billion across Europe, with Germany saving around $6 billion.
Dr. Freund emphasizes that aligning VAT rates with the environmental, health, and economic goals is essential for building more sustainable food systems. Lower taxes on plant-based products can lead to improved nutrition and health outcomes, while higher taxes on animal-based products can benefit the environment and tax revenues.
The European average VAT rate for meat and milk is currently 8%, while it is 9% for fruit and vegetables. However, there is significant variation in tax rates across different countries. For instance, Denmark imposes a 25% VAT on food, while the United Kingdom levies minimal taxes on food items.
In Germany, plant-based foods are taxed at just under 9%, which is higher than the 7% tax rate applied to animal-based foods. Discussions around a potential VAT reform have been ongoing in Germany, highlighting the importance of aligning tax policies with sustainability goals.
Overall, the research suggests that adjusting VAT rates on food products can be a feasible and effective strategy to promote healthier, more sustainable diets. By incentivizing consumers to make more environmentally friendly food choices, VAT reforms can contribute to a greener, healthier future for both individuals and the planet.
