The Central Union of Estonian Farmers has written to the Minister of Regional Affairs and Agriculture, Piret Hartman, expressing deep concern about the proposed increase in the sales tax rate from 22% to 24%, which will come into force on January 1, 2025. /nginx/o/2024/08/02/16262047t1hf3f5.jpg)
Grocery store. Illustrative photo. Photo: Peeter Lilleväli
The Central Union of Estonian Farmers has written to the Minister of Regional Affairs and Agriculture, Piret Hartman, expressing deep concern about the proposed increase in the sales tax rate from 22% to 24%, which will come into force on January 1, 2025.
The farmers' organization told BNS about this, noting that, according to the farmers' union, increasing the VAT rate will have a negative impact on the competitiveness of agriculture and food production in general and will increase economic pressure on both producers and consumers.
In its appeal, the Farmers' Union draws the minister's attention to the fact that in terms of the VAT rate on food products, after the proposed increase, Estonia will be in second place in the European Union after Denmark, where the VAT rate is 25 percent.
As farmers point out, at the same time, most EU member states apply lower rates of this tax on food products to support local food producers and provide greater access to food for their population.
At the moment, only three countries – Denmark, Lithuania and Estonia – have not introduced sales tax benefits on food products.
The Estonian Farmers' Union notes that an increase in the tax rate will affect food producers in two ways: through an increase in production costs and an increase in VAT for sales.
“If Estonia were to reduce the VAT rate on food products to the Latvian level of 12% or the Finnish level of 14%, this would reduce production costs and make prices more affordable for consumers, thereby supporting the availability and consumption of local food,” Estonians emphasize farmers
In their appeal, they also refer to the experience of Latvia, where a reduction in VAT on fruits and vegetables led to a fall in prices and an increase in consumption of these products.
“The Central Union of Farmers of Estonia believes that a similar positive effect would be real in Estonia if a lower VAT rate were applied to food products. Reducing VAT on food products would increase consumption of local food, stimulate the economy and, possibly, increase tax revenues,” farmers say.
The Farmers' Union proposes to carry out a thorough analysis of the impact of the proposed increase in the VAT rate on the agricultural sector as a whole, on consumers and on food production. The Union expressed its readiness to cooperate with ministries to find solutions that would ensure the competitiveness and sustainability of Estonian food production.
The Central Union of Estonian Farmers is an organization that represents the interests of Estonian farmers and food producers and defends their interests and sustainable development.
