Billions Spent, But Will Food Get Cheaper?

Irina

Writer

January 29, 2026
7:49 am

The Danish government has reached an agreement to reduce food taxes starting in 2028, allocating six billion kroner to lower the VAT on groceries. However, economists warn that the savings may be absorbed by businesses and administrative costs before reaching consumers’ wallets.

Government Agrees on Food Tax Reduction

The Danish government announced a new agreement with several political parties to allocate six billion kroner toward reducing food taxes from 2028 onward. This marks a significant step in the long-debated issue of making groceries more affordable for Danish households.

Finance Minister Nicolai Wammen explained that a working group will examine which model to implement. Two primary options are currently under consideration. The first involves a general reduction of VAT on all food items. The second proposes eliminating VAT entirely on fruits and vegetables.

If other viable alternatives emerge during the review process, they will also be evaluated. The decision reflects growing political pressure to address the cost of living concerns among Danish citizens.

Economists Express Concerns

Despite political enthusiasm, leading economists remain skeptical about the proposed tax changes. Chief economist Carl-Johan Dalgaard cautions that the implementation will be cumbersome and bureaucratic. According to him, Danes will not receive full value for their money.

He emphasizes that politicians cannot control retail prices directly. International experience shows that when VAT decreases, suppliers and middlemen often capture much of the benefit by adjusting their prices upward. This means the intended savings may never materialize in grocery stores.

Additionally, implementing new tax systems will require substantial investment. These administrative costs must come from somewhere, ultimately burdening taxpayers and consumers rather than benefiting them.

Rasmus Landersø, a research professor at the Rockwool Foundation, agrees with this assessment. Research demonstrates that tax reductions primarily benefit businesses, which can increase their profit margins. Lower VAT rates cannot be meaningfully felt at the supermarket checkout, he argues.

Expected Savings for Danish Households

Consumer economist Ann Lehmann Erichsen from AL Sydbank has calculated the potential monthly savings for different household types. For a family with two adults and two children, eliminating VAT on fruits and vegetables would save approximately 199 kroner per month.

If the general food VAT were reduced from 25 percent to 20 percent, the same family would gain 222 kroner monthly. A further reduction to 15 percent would yield 443 kroner in additional monthly savings.

For single-person households under 60 years old without children, the numbers are more modest. Removing VAT on fruits and vegetables would save 69 kroner monthly. Reducing the general food VAT to 20 percent would provide 76 kroner in savings, while a reduction to 15 percent would give 153 kroner extra each month.

Surprisingly, these amounts are relatively small. Ann Lehmann Erichsen notes that Danes generally overestimate how much they actually spend on items like fruits and vegetables.

Historical Context and Political Resistance

This is not the first attempt to address Denmark’s high VAT rates on food. Previous efforts have failed due to significant disagreements among political parties.

Thor Pedersen, a former finance minister for Venstre and speaker of parliament, previously stated that his party was on the wrong track when proposing to lower VAT on all food items. During his tenure as finance minister in the 2000s, colleagues from other countries strongly advised against splitting the VAT system.

They warned him that differentiated VAT creates unprecedented bureaucracy and becomes impossible to reverse once implemented. Oddly, despite these warnings, many European countries maintain differentiated VAT systems, which Denmark is now moving toward adopting.

Comparison with Other European Countries

Denmark currently maintains a uniform 25 percent VAT rate on all goods and services. In contrast, Germany applies a general VAT of 19 percent but only 7 percent on food items. Sweden maintains a 25 percent general rate while charging 12 percent on groceries.

Denmark has historically imposed special taxes on chocolate and candy, which are absent in other European nations. The country also levies substantial duties on beer and wine. Meanwhile, Germany has no wine tax and far lower beer taxes than Denmark.

VAT revenue contributes between 250 and 300 billion kroner annually to the Danish treasury. Denmark ranks among the OECD countries with the highest VAT rates.

Cost to the State Budget

In May 2025, Enhedslisten’s Pelle Dragsted requested calculations from the Tax Ministry regarding the fiscal impact of various VAT reduction scenarios. The ministry’s analysis revealed that reducing VAT on all food items would cost approximately 13 billion kroner. Eliminating VAT specifically on fruits and vegetables would cost about 6.6 billion kroner.

Beyond the food VAT agreement, center-right parties have committed to supporting expedited processing of the food check agreement reached the previous day. This political maneuver is crucial for the government, as expediting legislation requires a qualified majority of 75 percent of parliamentary votes.

This ensures that Danish citizens will receive the food check before summer vacation. Economists view this check more favorably than the VAT reduction. As Ann Lehmann Erichsen points out, the food check delivers immediate impact, whereas implementing VAT changes could take years.

Industry Reactions and Concerns

Industry organizations including the Danish Federation of Food and Drink (FødevareDanmark) and brand manufacturers generally support a broad VAT reduction rather than targeted cuts. They argue that special rules for specific product categories like fruits and vegetables create administrative complexity that erodes the potential consumer benefit.

De Samvirkende Købmænd (DSK), representing Danish grocers, welcomes the agreement as a direct path to lower prices and reduced cross-border shopping. However, they emphasize the need to avoid administrative burdens that could diminish the intended effect.

In fact, the practical implementation challenges remain substantial. Businesses must update systems, train staff, and manage different pricing structures. These transition costs will likely be passed on to consumers in some form.