Ligi cites hypocrisy in European food tax policy

With a uniform tax rate of 20 percent applied to foodstuffs, Estonia is among the countries with the most-taxed food in the EU, reports Aripaev Online. Value-added tax applicable to food in Estonia is significantly higher than it is in Finland, Sweden, Germany, and many other countries.

The Director General of the Tax and Customs Board Marek Helm noted that exceptions in the value-added tax rate motivate entrepreneurs to start inventing various schemes to be able to pay lower taxes.

“In our estimation, differentiating value-added tax rates would add extra incentive for entrepreneurs to optimize their tax burden,” said Helm. “A uniform value-added tax system is simpler, clearer, and more easily understood,” he added.
Minister of Finance Jurgen Ligi, however, asserted that lower value-added tax rates applied to foods that are popular in Europe are hypocritical. “It is hypocritical to assert that this would benefit poorer people more; the truth is, those with more luxurious food carts would gain more from lower tax rates,” said the minister.

He firmly opposes any proposals that Estonia might impose a lower VAT rate on some foodstuffs. “The lower VAT rates on food reflect the hypocrisy of social and economic policy: the other side of the coin is that countries are accumulating debts and deficits, nearly half of the foodstuffs in Europe are wasted, people are obese rather than go hungry,” said Ligi, adding that a rate that is lowered is nearly impossible to bring back to a higher level. “At the same time, all expert opinions recommend that besides cutting costs, Europe ought to abolish tax exemptions,” he asserted.