Value added tax (VAT) is effectively a retail sales tax. Whereas a sales tax is collected only at the point of sale to the consumer, VAT is collected at different stages of the production process as value is added to the product. VAT paid to the tax authorities is calculated from the difference between prices on buy and sell, i.e. added value. The consumer will pay in the end, as VAT is added to consumer prices. In 2005 VAT was about 20% of the total Danish tax-revenue. In Denmark we have a uniform VAT of 25%, but it is frequently suggested from politicians, that a differentiation of VAT could be a tool as stimulus for making healthy choices. The interest for a reduction of VAT on fresh fruits and vegetables have been the prime focus based on the assumptions, that this could lead to a reduction in cardiovascular morbidity and mortality, decrease the incidence-rate of bowel cancer, and to a minor degree to reduce the burdens of obesity. Many other countries have reduced VAT on foodstuffs, but not with the intentions directed against public health. The aim has mainly been social, to provide sufficient calories to all the population or directed against trade-problems like preventing import or border trade. Accordingly, comparative studies would not provide any answers to questions about the expected benefits of VAT-reductions of this type. This paper looks into the primary, economical analyses to evaluate, if the conclusions in these contributions are valid. Economical model studies suggest that there are possibilities for substantial effects on consumers habits and choices through VAT-reductions on for instance fresh fruits and vegetables, but there are a lot of assumptions and conditions put into the mathematical models, and a large part of those are not reasonable from a reality perspective, but was necessary for mathematical reasons. The estimated changes in consumer behaviour were much more complex than expected, but they were modest concerning fruits and vegetables, and they did not affect people in the high-risk-groups. At the same time they carried large transactional costs, and lead to a major loss of revenue for the state. Accordingly, measurable public health benefits can not be expected by lowering VAT on fresh fruits and vegetables, as the social impact on health is very large. In conclusion, beneficial health effects of a reduction in VAT on fresh fruits and vegetables can not be expected, and as such be a “good bargain” for the state. On the other hand the estimated effects do not exclude that it might be a good idea to look into reductions in VAT in other groups of food-stuff, especially in combination with a duty on other selected products, but this remains to be analyzed. There is a very bad correlation between the documented facts and the way these issues are handled in political speeches and the public debate.
|Uddannelser||Master of Public Administration, (Masteruddannelse) Afsluttende afhandling|