Denmark’s four-party government confirmed on August 19 that it will cut VAT on food during the current parliamentary term, a plan the Ministry of Taxation estimates will cost 17.4 billion kroner a year.
At a press conference in Copenhagen presenting the government’s work program for the new parliamentary year, several senior ministers said the VAT change would be delivered in this term. DR reports that Foreign Minister Lars Løkke Rasmussen of the Moderates and Economy and Interior Minister Pia Olsen Dyhr of SF both gave that assurance.
The coalition agreement calls for halving VAT on food and removing the 25 percent rate on fruit and vegetables entirely. Prime Minister Mette Frederiksen of the Social Democrats said the government would work in close interaction with the retail sector, so the reduction reaches consumers rather than supermarkets. According to DR, she pointed to households that struggle to pay for an ordinary grocery run.
Ministry of Taxation calculations put the annual cost at 17.4 billion kroner. DR reported earlier in August that removing VAT on fruit and vegetables accounts for 2.6 billion kroner, while halving VAT on other food accounts for 14.7 billion kroner.
Criticism from economists and business
DR sets out three main objections raised by critics. Economics professor Carl-Johan Dalgaard told Altinget in January that differentiated VAT would require expanded administrative work in companies and an entirely different IT system for the Danish Tax Agency.
Morten Høyer, political director at Dansk Industri, has told DR that the proposal would mean markedly higher bureaucracy costs for businesses. A Dansk Industri analysis from January 2026 estimates the extra administrative burden at between roughly 1.1 and 3.8 billion kroner a year.
The second objection concerns whether shoppers will see the savings. Dalgaard has said to DR that in markets with limited competition, VAT reductions tend to be absorbed in supply chains, appearing as higher margins for producers rather than lower prices in Denmark.
The third point is the financing. Part of the money is to come from freezing all deductions and thresholds on the annual tax assessment in nominal terms for two years, instead of raising them with wage growth. In practice, that means higher income tax than under normal indexation.
Anders Vistisen, finance spokesperson for Dansk Folkeparti, called the model deeply unsympathetic in Jyllands-Posten earlier in August. He proposed financing the VAT cut through development aid cuts or by converting support for Ukraine into loans. Venstre’s finance spokesperson Stephanie Lose called the freeze a hidden tax in June.
Løkke Rasmussen said at the press conference that the extra tax revenue from the freeze would be returned to Danes immediately. It remains unclear when the freeze takes effect.
