Danish government considers dropping VAT on organic meats

10-Feb-2014 - Last updated on 10-Feb-2014 at 09:42 GMT

Denmark considers dropping VAT on organic meats

Denmark’s ministry of agriculture (MoA) is examining a proposal, supported by the country’s farming, retailing and consumer groups, to abolish VAT on organic products, including meat. The ministry is expected to deliver a decision once Prime Minister Helle Thorning-Schmidt’s centre-left administration completes its budgetary review in April.

Political pressure encouraging the government to promote organic production in this way has been built by investigative television reports by state broadcaster Danmarks Radio (DR), which exposed poor animal husbandry practices at commercial non-organic pig farms in Denmark. However, VAT abolition could raise EU competition complaints, said Christian Friis Bach, the pro-government Radikale Venstre (Social Liberal Party) party’s spokesman on agriculture.

He warned a European Commission legal challenge to such a reform could happen, even if the government integrated removing VAT on organic food into a broader education-based programme encouraging consumers to eat more healthy food.

“A government removing VAT in order to drive sales of specific products could find itself on a slippery slope with EU regulations. It could be perceived as unlawful state aid, as such an action could be seen to favour certain foods over others,” said Bach.

Meanwhile, Peder Mouritsen, chairman of the Danish Association of Family Farms (Dansk Slægtsgårdsforenings), said the removal of VAT on organic foods would significantly increase demand for organic meat products. “Organic meat producers would welcome it – and so too would food retailers. The real winners from any VAT removal initiative would be consumers, as cutting VAT would bring prices of organic prices more into line with non-organic meats. That said, there are bound to be competition issues to any decision,” said Mouritsen.

A decision to abolish VAT on organic products could reduce organic meat retail process by up to 40%, said John Wagner, president of the Danish National Grocer’s Association (DNGA/De Samvirkende Købmænd). “Although demand for organic pork and beef is good in Denmark, consumers can be scared off purchasing organic because of the price gap, which can be as much as 50% above the price of non-organic meats,” Wagner said.

The DNGA represents Denmark’s biggest food retailers operating over 1,250 stores, including Rema 1000, 7-Eleven and SuperBest.