Finnish Food and Drink Industries’ Federation (ETL) is dismayed that the government continues to pursue the increased VAT on sweets and chocolate, despite the well-documented issues with the tax.
The proposal to tighten taxation is legally discriminatory as it does not treat different product categories equally. Moreover, it fails to promote public health or generate the expected tax revenues, as domestic production and investments decline.
Just before Christmas, the Ministry of Finance published a draft government proposal to increase the VAT rate on sweets and chocolate for public consultation.
Food industry companies in Finland are facing growing uncertainty in tax policy.
– Uncertainty about the future taxation of food and beverages affects the entire food industry, not just the manufacturers of the targeted products. A survey conducted among our member companies indicates that political risk is holding back food industry investments in Finland, says Mikko Käkelä, CEO of the Finnish Food and Drink Industries’ Federation.
The Ministry of Finance’s proposal to increase VAT on sweets and chocolate is essentially a penalty tax on investments in Finland. It not only freezes much-needed new investments in the domestic food sector but also risks driving them abroad.
Finnish Food and Drink Industries’ Federation argues that the idea of taxing sweets and chocolate differently from other food products should be abandoned as unworkable.
– The proposal will neither increase tax revenues nor improve public health. Consumers will simply shift their demand within the same product category to cheaper alternatives or other similar indulgence products, Käkelä states.
The government’s plan undermines efforts to grow Finland’s food exports and discourages planned factory investments in the country. Success in the domestic market is a crucial foundation for expanding into export markets.
– Raising the VAT on sweets and chocolate will hit hardest those food industry companies that use high-quality, responsibly sourced domestic ingredients. As a result, the tax will also impact domestic raw material producers, as production of Finnish sweets and chocolate declines and the government consciously opens the door to an influx of cheap imported confectionery, Käkelä warns.
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