An Environmental Change Institute / Oxford Martin School-led team of researchers have reported that setting VAT rates based on health and environmental considerations can help citizens choose healthier and more sustainable diets and make them more affordable.
In the UK and many European countries, value added taxes (VAT) on foods are often reduced but without a clear justification. In their study published in Nature Food, the researchers say levying full rates on meat and dairy and zero-rating fruits and vegetables could improve diets, as well as dietary health, environmental impacts, and government revenues.
They found that zero-rating fruits and vegetables could increase intake by about a portion per week on average, whilst applying the full rate to meat and dairy would reduce this by a portion a week in each case. In the UK, where most basic foodstuffs are zero-rated, meat and dairy intake would be reduced by up to double that, or two portions each.
Professor Marco Springmann, Senior Researcher at the Environmental Change Institute and the Oxford Martin Programme on the Future of Food (both part of the University of Oxford), as well as Professorial Research Fellow in Climate Change, Food Systems and Health at UCL's Institute for Global Health, and lead author of the study, said:
When it comes to food, tax systems across the EU and the UK are currently not fit for purpose. A modern tax system that addresses the critical health and environmental challenges of the food system is urgently needed. Adjusting VAT rates based on their health and environmental impacts is as good as a no-loss policy gets whilst delivering benefits for public health, the environment, and even government revenues.”
The researchers collected data on VAT rates for foods from the UK and the European Union (EU) and then used economic, environmental, and health assessments to estimate the impacts of changes in VAT rates on foods.
They add that these moderate changes could have large implications for people’s health and the environment:
- Eating more fruits and vegetables and less meat and dairy as a result of VAT reform would reduce cases of diet-related diseases such as heart disease, stroke, cancer, and diabetes. This would result in 170,000 less deaths in total across the UK and EU, or 330 per million people per year. In the UK, VAT reform would result in more than 2,000 less deaths.
- Across the UK and the EU, greenhouse gases would be cut by more than 50 million tonnes of carbon dioxide equivalent, a similar amount as Scotland and Northern Ireland’s emissions combined. In the UK this would be 16 million tonnes, or the equivalent of half of London’s emissions.
- Demand for agricultural land from the UK and the EU would be cut by more than 70,000 km2, an area similar to the Republic of Ireland, even when factoring in increased production of fruits and vegetables. In the UK alone, more than 20,000 km2, or an area of land the size of Wales, would be freed from agriculture, and water pollution cut by a tenth.
The study also found that the new diets were similarly affordable, as consumers are expected to replace some higher priced meat and dairy with lower-priced fruits and vegetables.
Although the cost to consumers stayed the same, the shift in tax base would generate greater revenues that governments could use elsewhere. The value of additional tax receipts amounted to US$45 billion in total, or 0.2% of GDP. In the UK, revenues would even increase by 0.6% of GDP.
Read the paper in full in Nature Food: A reform of value-added taxes on foods can have health, environmental and economic benefits in Europe