Sweden looks at reducing VAT on organic food. - value-added tax VAT - Brief Article

Eurofood, Sept 27, 2001

The Social Democratic government in Sweden has agreed to investigate whether it is possible to cut the value-added tax on organic food as a way to increase consumption and thus create more secure production conditions for the organic producers.

The concession to look into the possibilities to cut the VAT on organic food was a result of the 2002 budget negotiations the government had held with the Green Party. The Greens have as a goal to promote sustainable organic farming.

The party now hopes it will be possible to cut the current VAT on food in half to only 6% on organic food. Differentiated taxes is, however, something that Brussels not eagerly agrees to, and the party expects some difficulties getting the proposal past the Commission.

Furthermore, sales figures released from the organic industry also show that production already is behind demand for organic products, why some question the need for further stimuli to boost demand. It is only in the meat market producers have been more reluctant to convert their operations and retailers complain supply is not sufficient to meet the demand.

In the budget negotiations, the Green Party also managed to wangle SKr20m (2.1m [European Dollar]) for a marketing support programme for organic food out of the government for concessions in other areas.

The government has a goal to have 20% of the Swedish farmland under organic production by 2005. By then, it also aims at having 10% of the dairy cows, beef cattle and lamb as organic.