Austria plans to halve the VAT on certain food prices, a scheme that will be funded by a tax on non-recyclable plastics.
The cut in VAT from 10% to 5% is scheduled for mid-year but the “foodstuffs” that will be subject to the discount have yet to be determined, the government announced yesterday (14 January).
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Austria’s competition authority will be responsible for ensuring the country’s retailers adhere to the decrease and pass it on to consumers.
Handels Verband (HV), the independent Austrian Retail Association, said food products already enjoy a VAT discount to the standard rate of 20% levied on other goods as its managing director Rainer Will welcomed the decision.
“Our retailers will pass on the effects of this tax cut to our customers wherever possible,” Will said in a statement. “It is crucial for us that this tax cut is truly permanent and not just temporary.”
The finer details of the tax on non-recyclable plastics still has to be finalised but the chairman of Austria’s chamber of commerce warned it has to be implemented selectively to avoid unnecessary financial burdens.
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By GlobalData“It is crucial not to burden those sectors with costs that have no influence on the use of plastic,” Rainer Trefelik, chairman of the Federal Trade Division of the Austrian Federal Economic Chamber (WKÖ), said in a statement.
“The aim is to prevent higher packaging costs from leading to price increases in retail – and thus further fuelling inflation. This potentially affects all sectors of the retail industry.”
Meanwhile, the Austrian government also plans to put a tax on imports from overseas in the form of a so-called “package levy”.
Trefelik said the tax would create a more level playing field for local retailers compared to international sales platforms but again the industry is awaiting more details from the government.
“It is unclear how the technical implementation of the collection process will work,” Trefelik added. “The vast majority of parcels are not processed in Austria but are imported into the EU via Hungary and Belgium. It is also unclear how the fee will interact with the flat-rate customs and processing fees announced by the EU.”
Handels Verband suggested the Austrian government could do more to relieve the burden on food prices and retailers from costs higher up the value chain, noting how coffee, cocoa and fruit juice “have become enormously more expensive in recent years”.
Its MD Will said: “It is clear that the retail price on the shelf, besides the value-added tax, depends primarily on input factors such as the procurement price, energy costs, collectively agreed wages, fees, and in some cases the world market price and harvest cycles.
“Effective measures for sustainably combating inflation must therefore address the root causes of inflation, in particular by providing noticeable relief from high energy prices, personnel costs, and bureaucratic burdens.”
