Estonian retailers say VAT on locally produced food could be cut

TALLINN – Retailers in Estonia find that consideration could be given to lowering the rate of value-added tax (VAT) on locally produced food. 

More and more foodstuffs of local origin are being bought in Estonia, but Estonians continue to be rather price-sensitive, Rimi Eesti manager Vaido Padumae said in a press release on Wednesday.

Padumae described lowering the VAT on locally produced food as one possible way of improving the situation.

"In Estonia VAT on food is among the highest in Europe. VAT on food is higher still than in Estonia only in Lithuania and Denmark," he said, adding that in some countries, such as Britain, no VAT at all is levied on foodstuffs.

Asked by BNS for comment, spokesman for Coop Eesti Martin Miido said that lowering VAT on food items is one of the fastest and most effective ways of improving the everyday coping of residents as well as an opportunity for the state to direct people's eating habits. Miido said that a zero VAT rate on fresh fruits and vegetables would motivate people to buy them more.

"Considering that at present VAT accounts for one-fifth of the price of Estonian residents' basket of groceries, we of course support lowering of VAT on foodstuffs -- fruits and vegetables in the first order -- to help promote healthy heating habits and reduce the price of food in the end," he said. 

Kristi Lomp, board member of Selver, said that the idea definitely has a supporter base, especially considering that Estonia is one of the countries with the highest rate of wage poverty in the European Union, where according to statistics one in five residents lives in relative poverty. 

Lomp added, however, that the option to be chosen should be unambiguous and easy to implement.

"Giving a tax advantage to local goods would definitely give an impetus to local production, but would make its implementation more difficult and might be in contradiction with the rules of the single market," Lomp said. 

The board member of Selver also highlighted the impact on the state budget, as the state would have to find money elsewhere or cut costs to bridge the gap in VAT receipts. 

The manager of Maxima Eesti, Edvinas Volkas, said that the retailer welcomes all steps that could eventually lower the prices of food items and basic necessities and help families better cope with day-to-day expenses. 

The uniform VAT rate of 20 percent valid in Estonia is applied also to food.