Food VAT reduction
Session: 15th Estonian Parliament, 5th sitting, information briefing
Date: 2025-02-19 14:44
Participating Politicians:
Total Speeches: 10
Membership: 15
Agenda Duration: 12m
AI Summaries: 10/10 Speeches (100.0%)
Analysis: Structured Analysis
Politicians Speaking Time
Politicians
Analysis
Summary
Today's fourth question in the Riigikogu was directed at the Minister of Finance, Jürgen Ligi, concerning the reduction of value-added tax (VAT) on foodstuffs. The question was posed by Vladimir Arhipov, who emphasized that high inflation and rising food prices have caused significant difficulties for low-income people. Arhipov asked why the government is opposed to this proposal, especially if the budget deficit could be covered by a bank tax. Minister Ligi categorically denied this, stating that a reduction in VAT would create a shortfall of approximately half a billion euros in the state budget. He stressed that international experience (Finland, Latvia) shows that such a measure will not lead to a lasting price decrease, but will primarily serve to increase retailers' margins. According to Ligi, the main drivers of rising food prices are wage increases and high retail margins, not national taxes. He criticized the proposal as socio-politically ineffective, as it would bring greater benefit to wealthier people. In a follow-up question, Lauri Laats inquired what the actual "remedy" is that would actually lower food prices, and criticized the contradictory behavior of the government partners (social democrats). Ligi repeated that the state cannot regulate prices and that retailers' desire to obtain hundreds of millions of euros through a reduction in VAT is a "very cynical action."
Decisions Made 1
Decisions were not made.
Esimees Lauri Hussar
AI Summary
A member of the Riigikogu, Vladimir Arhipov, asks Finance Minister Jürgen Ligile about lowering the value-added tax on foodstuffs.
Vladimir Arhipov
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Vladimir Arhipov notes that, although the church issue has been the most important in recent times, it is necessary to discuss the welfare of the Estonian people and the lowering of the value-added tax on food, because government tax policy affects inflation and citizens' economic security; low-income people have difficulties purchasing food, and although lowering VAT is considered impossible due to a budget deficit, one could consider plugging the hole with a bank tax and, in this way, provide relief to those who cannot afford to buy food.
Rahandusminister Jürgen Ligi
AI Summary
A reduction in the value-added tax on food would reduce state revenue by about half a billion, and the benefits would be distributed mainly to merchants; prices would fall only in the short term, because food prices depend more on wages and store margins, and the state would be forced to compensate for this by raising other taxes.
Esimees Lauri Hussar
AI Summary
The chairman thanks the minister and invites Vladimir Arhipov to submit a clarifying question.
Vladimir Arhipov
Profiling Fraktsiooni mittekuuluvad Riigikogu liikmedAI Summary
Vladimir Arhipov asks how decisions are made in the government and how the coalition partner—the Social Democrats' proposal, for example a reduction of VAT on food—is discussed, and how such decisions are taken.
Rahandusminister Jürgen Ligi
AI Summary
Finance Minister Jürgen Ligi emphasizes that, with regard to the state budget, it is unacceptable to disseminate the coalition's demonstrative steps and tax policy outside the Ministry of Finance, because it does not work socially and increases merchants' margins and creates a more expensive trading network, while food prices are linked to supply and demand and rapid wage growth, and the state does not control prices.
Esimees Lauri Hussar
AI Summary
The chair, Lauri Hussar, thanked and gave his colleague Lauri Laats the opportunity to pose an additional question.
Lauri Laats
Profiling Eesti Keskerakonna fraktsioonAI Summary
Lauri Laats claims that reducing the value-added tax on foodstuffs is not an effective tool for lowering prices, because the food basket has risen significantly, and although many EU member states use this option, the question remains: what is that remedy that would actually lower food prices?
Rahandusminister Jürgen Ligi
AI Summary
Finance Minister Jürgen Ligi explains that retail margins are large and rise with wage growth, and therefore prices reflect both labor costs and demand, and the state cannot push prices down and should not take money from the state budget for merchants' interests.
Esimees Lauri Hussar
AI Summary
The Speaker, Lauri Hussar, thanks the minister and closes the discussion on the fourth question.