Doubts that tax on fruits & vegetables will fall to 0 percent; A “step back” says sector

A zero percent value added tax (VAT) on fruit and vegetables is legally complicated and is expected to yield little health benefit, said researchers from SEO Economisch Onderzoek. The organization examined many factors, including the effects and feasibility of reducing the sales tax, which was part of the deal struck between the political parties in their current national coalition agreement. Each possible variant of changing the tax will encounter serious objections. The conclusion that it will be difficult to reduce the VAT rate for fruit and vegetables to zero is a “step back” in the pursuit of healthier eating habits, said produce lobby GroentenFruit Huis in response.

By levying a zero percent VAT rate on fruit and vegetables, the Cabinet hopes to encourage people to make healthier food choices. The proposed measure unleashed a fierce discussion about which products should be included. After all, fruit and vegetables are also sold in all kinds of processed forms, sometimes with the addition of sugar or salt, or other ingredients that make the end product less healthy.

SEO has looked at which demarcation could work. “Based on feasibility and legal tenability, all variants therefore entail major-to-very major risks,” the researchers wrote in their report. Moreover, they said it is highly questionable whether people will actually opt for healthier food, because the price change due to the abolition of VAT is relatively limited.

Produce lobby GroentenFruit Huis argued that several studies have shown that price measures for fruit and vegetables do indeed have an effect. “In combination with other measures, it does provide the right incentive for a healthy choice.” GroentenFruit Huis thinks that it is relatively easy to first introduce the zero rate for unprocessed fruit and vegetables. This would already be a big step forward, a spokesperson said.

The loss of income for the government, depending on the variant chosen, would be between 550 million and 950 million euros per year. Because people with high and low incomes spend an approximately equal share of their income on fruit and vegetables, rich people benefit most from this tax reduction in absolute terms, according to the report.

SEO’s warning about the high costs associated with the tax measure was also received poorly by GroentenFruit Huis. “In a country where healthcare costs continue to rise and the percentage of consumers with overweight and lifestyle-related conditions is only increasing, in this case the costs outweigh the benefits.”

SEO also pointed to “alternative tools” to push people towards a healthier diet. For example, by increasing the taxation of unhealthy food, as is already happening through the sugar tax on soft drinks. Incidentally, the Central Planning Bureau (CPB) warned the Cabinet earlier this week to exercise restraint with fiscal measures to adjust the behavior of citizens and businesses.

Besides the health benefits, there is another reason why the Cabinet may still choose to introduce a zero rate for fruit and vegetables. The measure can also provide relief for households whose purchasing power is under severe pressure due to the sharp rise in consumer prices. Not only energy, but also daily groceries have become considerably more expensive in the past year as the Netherlands has faced unprecedented inflation since the outbreak of the war in Ukraine.

The nutrition expert center Voedingscentrum said it would be “a pity” if the zero rate does not make it, because it also sends an important signal. “Especially at a time when people see their groceries becoming more and more expensive,” the Voedingscentrum said. “But if it’s not feasible and the intended effect is too small, then it loses its function.”

State Secretaries Marnix van Rij and Maarten van Ooijen, respectively responsible for taxes and lifestyle & prevention, have announced that they will study the report carefully. They will provide a substantive response before the summer.

Reporting by ANP

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