Adjusting VAT on food could promote healthier diets, study finds

UK – A recent study led by UCL researchers has found that adjusting the Value Added Tax (VAT) rates on food based on their health and environmental impacts could encourage people to adopt healthier and more sustainable diets. 

According to the study, published in Nature Food, changes in VAT rates for different food groups could significantly influence consumption patterns and contribute to better public health outcomes. 

The study analyzed data on VAT rates in the UK and the European Union (EU), using economic, environmental, and health assessments to evaluate the potential impact of these changes.

Professor Marco Springmann, the lead author of the study from the UCL Institute for Global Health and University of Oxford, stated, “When it comes to food, the 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.” 

He emphasized that a reform in VAT policies could have multiple benefits, including improving public health, reducing environmental damage, and even increasing government revenues.

Currently, in the UK, basic foodstuffs such as raw meat, fish, vegetables, fruits, cereals, nuts, and pulses are zero-rated, meaning they are not subject to VAT. 

However, the study suggests that by maintaining the zero VAT rate on fruits and vegetables while applying a full VAT rate of 20% on meat and dairy products, the consumption of these foods could be altered for the better. 

The study estimates that this change would lead to healthier diets by reducing the intake of meat and dairy.

The researchers found that applying full VAT on meat and dairy could decrease the weekly intake of these food groups by one portion per week in EU countries, and up to two portions per week in the UK. 

This shift in diet could significantly reduce the prevalence of diet-related diseases such as heart disease, stroke, cancer, and diabetes. 

The study estimates that the UK and EU could see 170,000 fewer deaths annually as a result, with over 2,000 of those deaths prevented in the UK alone.

In addition to health benefits, the reduction in meat and dairy consumption would also have environmental advantages. 

The study reports that the lower demand for beef and milk would cut climate-warming emissions equivalent to the combined emissions of Scotland and Northern Ireland. In the UK, this would be equivalent to halving London’s emissions. 

The agricultural land used for beef and milk production would also decrease significantly, freeing up areas of land for other uses and reducing water pollution by 10%.

The study also found that, despite the changes in food consumption, the overall cost to consumers would remain similar. 

By replacing more expensive meat and dairy products with affordable fruits and vegetables, people could maintain a balanced diet without extra financial strain. 

Furthermore, the researchers estimate that the shift in VAT rates would generate an additional £36 billion in government revenue across the UK and EU, which could be used for other public initiatives.

 “Setting VAT rates based on health and environmental considerations could have large implications for people’s health and the environment, alongside generating money for the economy,” Professor Springmann concluded.

The study suggests that reforming food VAT policies could be a powerful tool in tackling both health and environmental challenges while also boosting economic growth.