Retailers prepare for cut in VAT on food

Lower tax takes effect on Thursday of next week

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Prices of food are set to go down by about 4.3 per cent on Thursday of next week as the result of a cut in value added tax on retail sales of food.
      In October the VAT levied on food sold in grocery stores will be brought down by five percentage points to 12 per cent from the current 17 per cent.
      The German-owned chain Lidl is taking a head start by implementing the lower prices already on Thursday of this week.
      The large K and S retail chains plan to display both the old and new prices, in order to show buyers exactly how much they will save.
      Lidl, as well as the Siwa and Valintatalo shops of the Suomen Lähikauppa chain are only displaying one price for each product, for the sake of clarity.
     
The S and K chains will phase out the dual price tags as the prices change. One of the managers of the S-Group expects that the old and new prices will be on display until about the end of the year.
      The revision of prices is a considerable effort for the store chains, and it will be repeated in July 2010, when VAT goes up again by one percentage point to 13 per cent.
     
Changing the prices on all of the products will cost an estimated EUR 5-10 million, says Osmo Laine, managing director of the Finnish Grocery Trade Association. He expects the transition to go as smoothly as the change from the old currency, the markka, to the euro.
      “It succeeded then, and we plan for it to succeed now as well. The next phase is to bring down the tax on foodstuffs to the European level of 7-8 per cent”, Laine points out.


Previously in HS International Edition:
  Government reaches agreement on VAT cut on food (27.8.2009)
  Lowering of VAT on food will see two prices marked on food items during transition period (11.9.2009)
  Minister of Finance suggests compromise over cutting VAT on food (18.8.2009)

Helsingin Sanomat