Sweden's administration intends to slash Value-Added Tax (VAT) on food items in the upcoming election budget

Sweden's administration intends to slash Value-Added Tax (VAT) on food items in the upcoming election budget

In a significant policy shift, the opposition Social Democrats have proposed halving Value-Added Tax (VAT) on food in Sweden. Finance Minister Elisabeth Svantesson, along with Sweden Democrat leader Jimmie Åkesson, presented this proposal during a meeting with the four Tidö parties supporting the government last month.

Mikael Damberg, finance spokesperson for the Social Democrats, made this announcement to the Dagens Nyheter newspaper. The proposal comes after the government's plan to reduce VAT on food was published.

The VAT reduction on food is intended to increase the purchasing power of Swedish households, particularly in the face of rising inflation and high interest rates. Food prices are considered important for improving household finances, according to Mikael Damberg.

However, the Social Democrats had previously been sceptical about cutting VAT on food. They opposed the VAT reduction plan for 2023, arguing that the measure would primarily benefit higher-income groups rather than effectively supporting low-income households.

The proposed VAT reduction will take effect on April 1st, 2023, and continue until the end of 2026 and 2027. The Social Democrats also plan to propose increasing child benefits by 200 kronor a month.

To ensure that the tax cut is reflected in prices, the government will instruct the Swedish Competition Authority to monitor food retailers and wholesalers. The authority will ensure that margins are not expanded as a result of the VAT reduction.

It is estimated that the tax cut on food will cost 16 billion kronor in 2026 and 21 billion kronor in 2027 in lost revenue. The VAT reduction is expected to boost consumption and stimulate economic growth in Sweden.

However, it's important to note that the policy of halving VAT on food is a proposal from the opposition Social Democrats, not the current government. The Social Democrats have not explicitly mentioned collaboration with the Sweden Democrats in this context.

This policy shift by the Social Democrats is a response to households feeling the impact of economic challenges. The VAT reduction on food is one of several measures aimed at improving the financial situation of Swedish households.

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