Study
The impact of a VAT reform on plant-based milk alternatives
As part of the debate on reducing VAT on plant-based milk alternatives, we have modelled how the reform would affect consumption, tax revenue and the impact on the climate.
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Background
Despite political calls to reduce VAT on plant-based milk alternatives from 19 % to 7 %, the consequences of such a reform have never been adequately quantified – neither in terms of consumption nor in terms of tax revenue or climate impact.
Our Approach
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1
Development of a microeconomic tax model incorporating price and cross-price elasticities.
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2
A comparison of a ‘business-as-usual’ scenario and a tax reform scenario.
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3
Quantification of the effects on consumption, tax revenue and CO₂, water and land use.
Result
The comparison of scenarios shows that, whilst reducing VAT on plant-based milk alternatives would lower tax revenue by around 40 million euros per year, it would at the same time reduce future climate-related costs by around 62 million euros and lead to a significant increase in sales of plant-based alternatives (around +64 % compared with 2020); water and land consumption fall by around 72 billion litres and 1.1 billion m² respectively. From an economic perspective, the reform is therefore efficient.