Danish politicians from the Liberal Party, Venstre, has announced plans to cut food VAT and corporate tax as part of a new tax reform proposal, but only after the next general election. The initiative comes in response to rising food prices and growing pressure for economic relief.
Tax Reform to Tackle Cost of Living
At its national party congress held over the weekend in Odense, Denmark’s Liberal Party (Venstre) unveiled its primary campaign platform for the country’s next general election: a sweeping tax reform targeting both consumers and businesses. The party, led by chairman Troels Lund Poulsen, intends to reduce the value-added tax (VAT) on food and cut the corporate tax rate to stimulate economic relief and growth. The plan is to help the economy.
According to Poulsen, the goal is to ease the burden on Danish families who are increasingly affected by soaring grocery bills. The proposal includes lowering VAT on food, a policy rarely implemented in Denmark, where the current flat VAT rate stands at 25% one of the highest in the European Union. The change would help many families.
Helping Consumers at the Checkout
Although specific details remain under discussion, the party is advocating for a differentiated VAT system that would reduce taxes on food items, especially those considered healthy. The initiative could potentially make everyday grocery shopping significantly more affordable for consumers.
This comes amid public dissatisfaction with the government’s perceived inaction on tackling food inflation. According to Statistics Denmark, food prices rose by approximately 7.5% in 2023, exerting pressure on household budgets and igniting calls for tax relief.
The idea of differentiated VAT was previously met with skepticism among Danish politicians, with concerns about administrative complexity. Earlier statements from the Ministry of Taxation indicated it would be technically challenging to implement such a system due to limitations in the government’s IT infrastructure. However, efforts are now underway to explore practical solutions, prompted by increasing political will from parties like Venstre and the Moderates.
Focus on ‘Healthy Foods’
Venstre’s chairman emphasized that the VAT cut would likely be targeted toward healthy food categories, though the party has yet to define what qualifies as “healthy.” This aspect of the reform is expected to be a topic of internal discussion as elections approach.
The party argues that lowering VAT on food could serve as a socially balanced measure, as it would potentially benefit all income groups. By focusing on nutritional staples like fruits, vegetables, and whole grain products, the reform could support healthier diets while easing cost pressures.
Business-Friendly Measures Also in Play
As part of the broader tax reform, Venstre also proposes reducing the Danish corporate tax rate from its current 22% to 20%. The party believes this adjustment will make Denmark a more attractive environment for investment and job creation while aligning with economic trends in other EU countries. For comparison, the average corporate tax rate in the European Union is approximately 21.5%.
An analysis by the Danish Economic Council published in early 2024 revealed that reducing corporate tax by even a single percentage point could increase Denmark’s GDP by up to 0.25% over time, assuming the tax cut is financed responsibly.
Timing Linked to Next General Election
It’s important to note, however, that these measures are conditional on Venstre returning to government following the next parliamentary elections. Troels Lund Poulsen made it clear that the party is still studying the economic implications and will present a detailed plan during the official campaign period.
Venstre’s proposal aims to distinguish the party from its current coalition partners. While the Social Democrats have expressed caution about differentiated VAT, the Moderates have already signaled their support for the idea, making this an increasingly central issue in the pre-election debate.
Wider Context of Economic Debate
The announcement arrives at a time when economic inequality and rising living costs dominate the discourse of Danish politicians. The increasing cost of basic goods has sparked wider discussions about how to create a fairer taxation system and provide relief without destabilizing public finances.
With around 1,500 delegates and party supporters attending the congress in Odense, the tax reform proposal received an enthusiastic reception, suggesting that it will be a key element of Venstre’s strategy as voters head to the polls within the next two years.
In the months ahead, further details on the scope, definition of “healthy” food, and fiscal impact of the proposed VAT cut are expected as Danish politicians refines its policy platform in preparation for national elections.
