Denmark’s Economic Council advises against lowering VAT on food, citing high costs, management difficulties, and minimal benefits for needy households. They recommend direct financial support for low-income families and subsidies for healthy food instead, emphasizing the simplicity of Denmark’s current single VAT rate of 25%.
Denmark’s Economic Council Rejects Lower VAT on Groceries
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Denmark
Author: Ivana Picajkić
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Content accuracy validation date:
19.12.2025
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08:14h
Denmark’s top economic advisers have warned against lowering VAT on food, fruit, and vegetables. According to a new report from Denmark’s Economic Council, reducing VAT on groceries would be expensive, difficult to manage, and unlikely to help households that need support the most.
The proposal has gained attention because food prices remain high, and several political parties and unions have called for VAT cuts. However, the council says that lower VAT rates would not significantly reduce inequality or promote healthier or more sustainable consumption.
Denmark currently applies a single VAT rate of 25%, one of the highest in Europe. This tax accounts for about 10% of the country’s total economic output in public revenue. Experts warn that changing this system would affect state finances and increase complexity for businesses, which would need to apply different VAT rates to different products.
The report gives three main reasons for rejecting lower VAT on food. First, if the goal is to support environmental objectives, direct taxes on greenhouse gas emissions are more effective. Second, if the aim is to help low-income households, targeted tax cuts or welfare payments are cheaper and more precise. Third, using VAT to promote healthier eating is costly compared to other policy tools.
The Economic Council also highlights the administrative burden of a multi-rate VAT system. Denmark has long favoured a single VAT rate because it is simple and transparent, and the experts believe this approach should be maintained.
Instead of lowering VAT, the council recommends increasing tax allowances, providing direct financial support to low-income families, or subsidizing healthy food production. These measures, they argue, would better address social and economic concerns without weakening the VAT system.
Despite growing political pressure, economists remain clear in their conclusion: cutting VAT on groceries may seem attractive, but it would cost the state a lot, bring limited benefits to consumers, and make the tax system more complex.
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