High prices for fruit and vegetables: Özdemir for VAT exemption

Agriculture Minister Özdemir has joined the call for a VAT exemption for certain foods. There was approval, but also criticism of the idea from associations and science.

Federal Minister of Agriculture Cem Özdemir supports the demands to completely exempt certain foods from VAT. “If we make fruit and vegetables cheaper, we not only relieve the burden on consumers comparatively inexpensively, but also promote healthy nutrition through the steering effect gained,” said Özdemir of the German Press Agency (dpa). “That would be a double dividend proposal, which is how I prefer it.”

However, Özdemir referred to the Ministry of Finance’s responsibility for tax issues. An amendment to the so-called EU VAT system directive that came into force two weeks ago would make such a project possible, since it allows tax exemptions for food and other goods to cover basic needs.

Burdens due to high inflation rate

According to the Federal Statistical Office, food cost 6.2 percent more in March than a year earlier. In particular, edible fats and oils (up 17.2 percent) and fresh vegetables (up 14.8 percent) became more expensive. Due to the high inflation rate, more and more people are reaching their financial limits, said the president of the social association VdK, Verena Bentele, the dpa.

Low earners, pensioners and recipients of basic security no longer know how to pay for groceries or their electricity bills. The VdK is therefore calling for VAT to be waived for staple foods

The Federal Association of Consumers spoke out in favor of the complete abolition of VAT, especially for fruit, vegetables and legumes. This would cushion the effects of rising prices, which is currently important for low-income households, said food consultant Christiane Seidel. “At the same time, it would make it easier for many people to eat healthily and contribute to climate-friendly food production.” Similar demands come from the German Diabetes Society.

Low-income households are particularly affected

Approaching VAT could support people with low incomes in particular – since they spend a larger part of their monthly income on food than people with high incomes, as the German Institute for Economic Research (DIW) explained. DIW President Marcel Fratzscher told the “Augsburger Allgemeine”: “The federal government should temporarily abolish the reduced VAT rate of seven percent, as this would make food and other basic services cheaper and help people quickly and unbureaucratically.”

Economists and trade critical

The Vice President of the Kiel Institute for the World Economy, Stefan Kooths, sees no solution in this. Rising prices reflect greater shortages that the state cannot eliminate, he told the Rheinische Post. “If the state wants to do something effectively against higher food prices, then it should think about freeing up agricultural land.”

The trade association HDE was also critical. Turning the VAT screw is the wrong way. This would also benefit households that could bear the rising prices. Instead, the federal government should increase state transfers accordingly.