The Minister of Regional Development and Agriculture, Piret Hartman, on the radio program Äripäev, hinted at the possibility of changing the VAT on food products. “Taxes are the responsibility of the Ministry of Finance, but agriculture, food production and their sustainability are our topic,” she said, adding that the issue of reducing VAT and the experience of other countries was also discussed with retail chains.
The minister noted that the goal is to publish the results of the analysis next spring and then begin debate to formulate the state budget for next year. Hartman emphasized that Estonia is one of the few countries where benefits or a reduced VAT rate are not applied to food products. “I don’t think other countries did this just like that, without results,” she added.
“Of course, this is a very incompetent step on Piret’s part to order this study and take on this topic. The ministry has no competence either in matters of the state budget or in tax policy. Another thing is that there is nothing to explore,” he said. – All these effects have been studied, they can be guessed from a theoretical point of view, and the fact that some interested group is asking for this (the Chamber of Commerce and Agriculture and retail chains – ed.) does not give it a reason to change its field of activity and spend there is public money for this.”
According to League, both theory and previous research show that the VAT cut has little impact on the cost of food, and the price gains do not pass through to the consumer to a noticeable extent.
“Even the Union of Food Industry recently came out against reducing the VAT rate on food products, since then other taxes would rise even more,” noted the Minister of Finance. “Of course, people think that government taxes are to blame for prices, but in fact, it is government taxes that mitigate social problems. In this case, such tax cuts will in no way contribute to increasing economic efficiency.”
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A situation in which there is an increase in prices for goods in stores is usually called inflation. However, this is a consequence of various kinds of processes, but not the reason for rising prices. The reasons that can lead to inflation are of a diverse nature.
Representatives of the food and trade industry rate consumer confidence as extremely low, point to clear problems in their industries and express concerns about the impact of tax policy changes that will come into force next year.
The big challenge for enterprises at the moment is the decline in volumes, and the food industry has not yet recovered from the shocks of the last few years, said Kaido Kaare, head of Orkla Eesti, on the morning program of radio Äripäev.
Source: www.dv.ee
