Swedish supermarkets on the frontline to eliminate VAT

The recent rapid increase in food prices has led to greater price sensitivity among many consumers. At the same time, the state is profiting billions from these price hikes through higher VAT revenues. In 2023 alone, the state increased its VAT revenues by nearly SEK 12 billion = €167 million as a direct consequence of rising food prices. As prices rise and the debate focuses almost entirely on the high cost of food, important issues regarding long-term sustainable and fair food production are being overshadowed.

Not just a Swedish problem

Other countries are facing similar price increases, and Statistics Sweden (SCB) confirms that the price increases are justified given the sharply rising costs in a food chain where profit margins are already low. The higher food prices pose several problems. Due to strong focus on prices, many people reduce their consumption of fruits and vegetables and other sustainably labeled foods, such as KRAV, Nyckelhålet, Fairtrade, MSC, and EU organic. The higher production costs of such foods result in these foods being increasingly overlooked as prices rise. This is unfortunate. Sustainably labeled food contributes to improved environmental conditions, public health, social conditions in production, and animal welfare through reduced use of chemicals, improved working conditions, better conditions for animals, and less salt and sugar in food.

To make more affordable sustainable food

The food sold in a typical grocery store today has differentiated VAT, as the VAT on food is lower than on most other goods. However, the same VAT rate applies to all types of food. Therefore, VAT is not used to make it easier for customers to make better choices. For the past three years, Axfood proposes reducing or eliminating VAT on sustainably labeled food, such as fruits and vegetables, to make them more affordable. This would enable more consumers to shop more sustainably and healthily. It is a development that benefits both individuals and society. The government recently presented an updated food strategy that includes several good proposals, particularly regarding preparedness, but lacks sufficient focus on sustainability and its connection to national environmental goals.

Objective to steer the production as well

Eliminating or reducing VAT on sustainably labeled food not only levels the price difference between sustainably labeled and non-sustainably labeled food. It also provides incentives for the food industry to invest more in sustainable production and motivates more food companies to make changes so that their products meet the requirements for various sustainability labels. In other words, it is an effective way to steer production and consumption towards becoming more healthy and sustainable, both in the short and long term.

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