Estonian Chamber of Agriculture: Lower VAT on foodstuffs would greatly benefit consumers

TALLINN - In most states of the European Union, a lower VAT rate has been established on food, and doing so would also greatly benefit consumers in Estonia, according to Roomet Sormus, chairman of the board of the Estonian Chamber of Agriculture and Commerce.

"We've repeatedly proposed to lower the VAT rate on basic foodstuffs, however, no earlier government has taken it into consideration, unfortunately," he said.

Sormus noted that the Chamber of Agriculture and Commerce is in favor of lowering the VAT rate on basic foodstuffs to the same level as in most EU member states where a more affordable VAT rate applies to food.

"In the EU, there are just three more states in addition to Estonia that do not have a lower VAT rate for food. We deem it particularly important to lower the VAT now that food prices have grown rapidly and may grow even further," he said.

The chairman of the organization pointed out that food accounts for the largest share of Estonian households' budgets, around 21 percent.

"The consumer price index grew 22 percent on year in June, and the prices of food and non-alcoholic beverages over 19 percent. It puts a severe pressure on consumers and makes them consider their consumption decisions increasingly carefully," Sormus said.

"Unfortunately, it also means that consumers will start opting for cheaper foods, which are often either imported or of lower quality. For example, when it comes to meat products, close to 45 percent of consumers make their decision based on the price only. For them, the origin and other parameters of the goods are of secondary importance," he added.

Sormus said that because retail chains purchase goods at the lowest possible price and with the price level of imported food being lower in many cases than that of foods produced in Estonia, imports can be expected to grow under rapid inflation. That, in turn, affects the coping of local businesses and consumers, not to mention people's habits of eating healthily.

The chairman of the Chamber of Agriculture and Commerce pointed out that while Estonian people prefer domestically produced food, they are also very price sensitive.

"The 2020 study by the Estonian Institute of Economic Research into grocery shopping preferences and attitudes highlights price sensitivity -- 50 percent of the respondents deem price very important. Domestic origin was deemed very important when making purchase decisions by 33 percent of the respondents. 74 percent of the respondents preferred food of domestic origin in 2020. The survey points out that people are not generally willing to pay more for domestic food compared with imported foods. In addition, many families also cannot afford the food they would prefer," Sormus said.

Meanwhile, Estonia is one of the few states in Europe that has not applied a lower VAT rate on food. Moreover, the VAT rate on food in Estonia is one of the highest in Europe.