VAT adjustments could save 170,000 lives a year in Europe
170,000 deaths a year could be avoided if European countries were to increase value-added tax (VAT) rates on meat and dairy products, while reducing them on fruits and vegetables. Such changes would also reduce Europe’s climate footprint and save billions of euros. These are the findings of a new study, contributed to by the University of Copenhagen.
University of Copenhagen researchers have contributed to a new study which concludes that value-added tax (VAT) rate adjustments on certain foods could save tens of thousands of lives in Europe, protect our climate, and generate significant revenue for state coffers.
“If European countries raise VAT on meat and dairy while reducing it for fruits and vegetables, a shift in consumer behaviour could prevent roughly 170,000 deaths in Europe each year, according to our estimates. At the same time, the change in consumption patterns would reduce the climate and environmental footprint of the food sector by an average of 5-6%,” says professor and co-author Jørgen Dejgård Jensen from the Department of Food and Resource Economics.
Significant differences between countries
Most European countries already have differentiated VAT rates on food, unlike Denmark, which applies a 25% VAT across the board, on all goods. The researchers calculated the effects of setting VAT on meat and dairy products at each country's highest existing VAT rate. For most countries, this would result in an increase for VAT on meat and dairy.
At the same time, the researchers analyzed the impact of eliminating VAT on fruits and vegetables, which European countries currently tax at varying rates.
Due to the significant differences in existing VAT rates across countries, the effects of these reforms would vary widely. However, overall, the changes would reduce demand for meat and dairy by an average of 9%, while demand for fruits and vegetables would increase by 8%. The largest decline in meat consumption would occur in the UK, Belgium, and Poland, while the greatest increase in fruit and vegetable sales would be in Denmark and Estonia.
Fewer cases of heart disease and cancer
The 170,000 annual deaths in Europe that could be prevented by adjusting VAT on these food categories are linked to increased fruit and vegetable consumption, reduced red meat intake and lower obesity rates. This figure translates to 330 fewer deaths per million people.
The reduction in mortality would primarily be due to: fewer cases of heart disease (54%), fewer cases of cancer (28%), fewer strokes (15%), fewer cases of type 2 diabetes and respiratory diseases.
At the same time, the estimated 5-6% reduction in the food sector's climate and environmental footprint would be primarily attributable to lower meat and dairy consumption. Such a reduction would result in: lower greenhouse gas emissions, reduced land use and freshwater consumption, and decreased nutrient runoff into aquatic ecosystems
A profitable solution
The new VAT rates would not just benefit public health and work to address climate issues, but also deliver economic gains to most countries. The changes would reduce Europe’s total healthcare costs by US$26 billion and climate-related costs by US$12 billion.
Furthermore, increased VAT revenue from meat and dairy would result in a net gain of US$83 billion. However, significant differences between countries would arise, with Denmark, for example, experiencing a net loss in VAT revenue.
At the same time, the VAT changes would have only a minimal financial impact on consumers. Calculations show that, on average, the additional food costs for consumers across European countries would remain below 0.5%. In Denmark, food expenses would even decrease.
"If we seek to address specific societal issues like climate impact and public health, adjusting VAT rates could be a relatively simple approach that would likely trigger fewer political conflicts than if new taxes were to be introduced. While a specific tax, such as a carbon tax, would probably have a more precise impact, political feasibility must be weighed," says Jørgen Dejgård Jensen.
The societal benefits of a reformed VAT system are clear, emphasizes co-author and postdoc Clara G. Bouyssou from the Department of Food and Resource Economics:
"The study shows that most European countries stand to gain significantly – both in terms of health and climate, but also economically through reduced healthcare and environmental costs, and for many countries, increased VAT revenue. The EU has also granted member states greater freedom to differentiate VAT on goods for environmental purposes. So, there is strong logic in using VAT rates as a tool for influencing our dietary habits."