Status: 08.06.2022 10:11 a.m
Economists support a move by Minister of Agriculture Özdemir: The Green politician has demanded that fruit, vegetables and legumes be exempted from VAT because of the sharp rise in prices.
In view of the sharp rise in food prices, calls for a suspension of sales tax on certain products are becoming louder. “Exemption from value-added tax for certain basic service products, such as fruit, vegetables and cereals, is socially wise and economically justifiable,” said Marcel Fratzscher, head of the DIW, to the “Handelsblatt”. Such a measure would benefit everyone and could also be implemented quickly.
The economist was responding to a demand from Federal Minister of Agriculture Cem Özdemir. A few days ago, in view of the consequences of the war in Ukraine, he spoke out in favor of relief for the population.
“For the state cheaper than a tank discount”
Özdemir advocated eliminating VAT on fruit, vegetables and legumes. This not only creates an additional incentive for healthier eating. Low-income households in particular would also benefit from such a step.
“People with low incomes in particular would benefit greatly from a VAT exemption for basic services,” said Fratzscher. Experience with the temporary VAT reduction in 2020 shows that 70 percent of the tax reduction was passed on to consumers – unlike the tank discount. In addition, a temporary tax exemption for certain foods “would be cheaper for the state than the tank discount”.
Rapid rise in food prices
Demands for the abolition of the reduced VAT rate for certain foods had already arisen in April. But since then, according to experts, the rise in food prices has intensified again. According to the latest data from the Federal Statistical Office in April, food prices for private households rose by 8.6 percent compared to the same month last year. This price increase was thus well above the average increase in consumer prices; the inflation rate was 7.4 percent in the same period.
Edible fats and oils in particular became more expensive (up 27.3 percent), as did meat and meat products (up 11.8 percent), dairy products and eggs (up 9.4 percent) and fresh vegetables (up 9.3 percent).
Cat food favored, baby food not
The reduced VAT rate of seven percent currently only applies to staple foods. All other groceries are subject to 19 percent VAT. It is sometimes difficult to understand which rate applies to which products: only seven percent VAT is due for cat food, while the full tax rate of 19 percent applies to baby food.
Milk is privileged, consumers pay the standard tax rate for oat and soy milk. The favored foods also include meat and sausage, but also ice cream and gummy bears as well as luxury products such as quail eggs.
Farmers’ association expects grain prices to remain high
Meanwhile, the Farmers’ Association expects the grain markets to remain tight for a long time to come. “Regardless of developments in Ukraine, we assume that the price level will remain relatively high,” said Joachim Rukwied, President of the Farmers’ Association dpa. Because reaction options are limited at the moment.
“We have a fertilizer shortage and exorbitantly high fertilizer prices,” says Rukwied. There are disruptions in the supply chains. Some machines are idle for a week because of missing spare parts. “In this respect, the difficult situation remains. We cannot expect a relatively rapid increase in production.”