Supermarkets told ERR that if VAT were lowered on food, they would pass on the savings to customers. The government has previously said retailers will pocket the difference themselves.
Estonia’s VAT rate rose to 24% on July 1 and there are no exemptions on food products, unlike in many other European countries. A petition calling for a reduced rate was recently signed by almost 100,000 people.
Coop CEO Rainer Rohtla said VAT made up a quarter of food prices, and it could not be claimed that cutting the tax would not lower prices.
“For our part, I would add that we can look every Estonian in the eye and say that if the government decides to lower the VAT on food, then the price in stores will drop accordingly,” Rohtla told “Impulss” earlier this week.
“All major retail chains have stated this during a meeting with the previous minister of regional affairs, where only Grossi Toidukaubad and Maxima were absent. All other major players in Estonia were present,” he added.
“Given the current level of competition, we are fighting every day over a single cent, whether a carton of milk costs 59 or 60 cents in the store. And already, there is a 20-cent subsidy per carton taken out of the store. In this situation, to assume that lowering VAT by 10% would not change prices is unrealistic. If one chain lowers prices, the rest will follow, because otherwise that one chain will be full of Estonians and the others will be empty,” Rohtla explained.
Prisma Communications Manager Kertu Kark also said a VAT reduction would be reflected in prices.
“We’ve said multiple times that in such a case, we would act transparently, and the entire price decrease stemming from the VAT cut would show up in the prices,” said Kark.
“We are very much in favor of lowering VAT on food, because we see that customers are going through tough times, and constant tax increases do not build confidence. We’d like to follow the example of the Nordic countries. For instance, Finland has a significantly lower VAT rate on food, and so do other countries. We see no reason why we should be at the forefront of the high-VAT countries,” Kark added.
Maxima communications manager Janika Jaago said that Maxima would comply with the law and national regulations.
“If VAT changes, then we will respond accordingly,” Jaago said.
“The idea that we are now somehow insanely greedy and pocketing all the money is simply not true. It is odd that such talk and speculation is circulating,” she added.
Jaago stressed that price increases did not originate at the discretion of the retailer.
“They happen when a supplier approaches a retailer with a request to raise purchase prices. At some point, the retailer’s hands are tied. To some extent, negotiations are possible, and perhaps a compromise can be reached where prices rise more slowly. But the root cause lies elsewhere; the retailer is just the final link in the chain,” she said.
Rimi Communications Manager Teet Koljal said Rimi’s CEO had said this repeatedly.
“If the state decides to lower VAT on food, or on some food products, then the corresponding price reduction will appear on our shelves. We have said this multiple times,” Koljal said.
Selver’s head of business accounting, Kristjan Anderson, said that ignoring a VAT reduction would be too risky for retailers.
“If someone tried to boost profits at the expense of a VAT cut, that would certainly backfire. That fear is unfounded,” Anderson said.
“A retailer who does not change prices and pockets the VAT difference, I believe that retailer would face a harsh fate in the market,” he added.
He stressed that for 98% of food items, the impact of a VAT change could be measured one-to-one.
At the same time, Anderson pointed out that since prices have risen by about 55% over the past four years, consumers may not strongly feel the effect of a 10% drop.
“Customers will not get the sense that food is now back to where it was in 2021,” Anderson said.
A week ago, Jana Guzanova, the initiator of a grassroots campaign to lower the VAT on food, handed over a petition to Riigikogu Speaker Lauri Hussar, bearing the signatures of nearly 100,000 supporters.
The initiative gathered record-breaking support: the petition, launched on June 30, had collected 98,580 signatures as of August 11. It proposes establishing a reduced VAT rate of 10% for all food products in Estonia, in line with the practice of most European Union countries. (ERR)