Government reaches agreement on VAT cut on food

Sweets tax to be restored

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The government reached agreement in its budget negotiations on Wednesday on the dispute over value-added tax on food.
      The government also decided to restore the tax on sweets and soft drinks. The sweets tax was last in use in 1999, and bringing it back is expected to bring about EUR 100 million into state coffers.
     
VAT on foodstuffs will come down in October from the present 17 per cent to 12 per cent, as Parliament decided. However, in July next year, all VAT rates are to go up by one percentage point, including that on food.
      The tax on food sold in restaurants is to come down in July from the present 22 per cent to 13 per cent.
     
The general VAT rate is going up in July from 22 to 23 per cent. The rate is applied to goods and services which do not have a lower rate of VAT.
     
Lower rates of VAT apply to foodstuffs, medicines, books, transport, lodging, as well as certain small service businesses such as hairdressers and bicycle repair shops, which have the lower rate on a temporary experimental basis.
      No VAT is levied on magazine subscriptions, or health and disabled services.
      The government also decided that the basic deduction in municipal taxation, which favours earners of low incomes, will rise from the present EUR 1,480 to EUR 2,200. The Ministry of Finance had proposed EUR 2,000.


Previously in HS International Edition:
  Main government parties planning sharp rise in VAT (25.8.2009)
  Vanhanen agrees in principle on reduction in restaurant VAT (19.8.2009)
  Minister of Finance suggests compromise over cutting VAT on food (18.8.2009)
  Study: Finnish food would be relatively expensive even without VAT (14.8.2009)

Links:
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