Prime Minister Mette Frederiksen has dismissed economists’ criticism of the government’s plan to cut VAT on food, saying she expects the change to lower prices in Denmark.
Frederiksen made the comment in writing to Ritzau on Wednesday, Avisen Danmark reports. She said she has seen skepticism from some economists, but that VAT cuts on food in Sweden and Norway led to lower prices, and she expects the same in Denmark.
The prime minister is in Odense for Socialdemokratiet’s summer group meeting, where the party held a press conference on Wednesday. Ritzau was not able to obtain an interview with her. VAT has been a recurring topic since the government was formed.
The proposal would remove VAT on fruit and vegetables and lower VAT on food in general. According to an answer from the Ministry of Taxation and Growth, it would cost 17.4 billion kroner a year. Economists have called it an expensive and ineffective way to help households.
Critics also argue that lower VAT does not necessarily pass fully into shop prices. Part of the reduction may instead end up as higher company earnings or be absorbed by administration.
In an answer to the Folketing’s Finance Committee earlier in August, Minister of Taxation and Growth Jakob Engel-Schmidt said studies on food, including fruit and vegetables, typically find a relatively large price pass-through from VAT cuts. The estimates cited were at least 70 percent, and around 100 percent for Norway and Sweden.
The same answer listed factors that could limit the effect. It noted that greater VAT differentiation would raise administrative costs for businesses, so the cut would not fully benefit consumers. The degree of pass-through would therefore depend on the size of those costs.
Parties split over the plan
The answer was requested by Liberal Alliance’s Ole Birk Olesen, who asked the minister to present research on how VAT cuts on selected goods affect consumer prices. Liberal Alliance opposes the proposal, for which the government still lacks a model. Venstre, which previously supported lower food VAT, is against the government’s financing and approach.
Frederiksen said the blue parties appear to have become supporters of Denmark having the highest tax on food in the EU. She described that as a different tone than during the election campaign, and said the government still wants shopping to be cheaper.
The government’s two supporting parties disagree. Alternativet is against, calling it a costly and ineffective way to help citizens. Enhedslisten political spokesperson Pelle Dragsted told Børsen earlier this month that the government’s survival depends on the measure being carried through. The Copenhagen Post has also reported that position.
Nordisk Post reports that implementation cannot begin before 2028, because technical changes are needed, and that the government has held talks with retailers about ensuring lower tax reaches supermarket shelves. According to Bloomberg Tax, a January agreement launched work on a model, with a final report due in the second half of 2026.
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