What we have seen is that the food VAT reduction has had a full impact in grocery stores. I think that is very good, and I am happy that consumers can buy good food at a lower price this way, says Lena Aronsson, Director General of the Swedish Consumer Agency, who heads the “Food Price Commission”.
When VAT was halved from 12 to 6 percent, food prices fell by 5.5 percent, which is in line with what the lower VAT means, according to the report that is now being submitted to the government.
The lower prices have since persisted, according to both authorities.
The investigation has looked at the four major players in the market, Ica, Coop, Axfood and Lidl.
Meat and vegetables
The results are consistent with previous measurements by Statistics Sweden and the industry, among others.
The price decline applies to all food groups, although they differ somewhat. Oils, fats and non-alcoholic beverages have fallen the most in price, while the decrease was somewhat smaller for meat, vegetables and sweets.
The effect on takeaway food, which is also covered by the VAT reduction, has been limited, according to the report.
The VAT reduction expires on December 31, 2027, and it is unclear whether it will be extended. No party except the Sweden Democrats currently wants to say whether it should be permanent.
Food prices can be expected to rise by 5.5 percent if VAT is restored, according to KI Director General Albin Kainelainen.
Of course, if you think it has been carried down, this indicates that it is also being carried up, he says.
Costs 25 billion
But factors such as world market prices, transportation costs and inflation also come into play.
Minister of Finance Elisabeth Svantesson (M) describes the food VAT reduction as a cyclical measure that supports households in a difficult time and boosts consumption.
However, it costs the state a lot, currently close to SEK 25 billion a year.
What happens after it expires at the end of next year, a government will have to come back to that, because all reforms that are implemented must also be financed, she says.
