The Finnish Government’s proposal to increase VAT on confectionery raises concerns
For more than 130 years, Fazer has been committed to developing the Finnish food market, creating employment opportunities and making long-term investments in Finland. The change to the VAT rate of confectionery products, which the Finnish Government proposed on Tuesday, causes Fazer great concern.
"We are very surprised by this Government proposal. The volatility and unpredictability of the political operating environment in Finland as well as regulation, which treats different actors unequally, is very worrying. We have always emphasised and wished for predictable, transparent legislation and an open dialogue with important stakeholders, and we have also strived for this in our own operations," says Christoph Vitzthum, President and CEO.
According to the proposal, there would be no increases in the value added tax rate of foodstuffs, but confectionery products as an individual category of indulgence products would be transferred to a higher tax rate. The proposal would treat product categories unequally and possibly steer confectionery consumption towards foreign products and other categories. Fazer is puzzled by the Government's proposal to bring a single category of indulgence products within the scope of the standard VAT rate. In food products, one strong consumer trend is the mixing of traditional categories. An indulgence product can also be potato chips, puddings, breakfast cereals, etc. At the same time, the proposal completely ignores products containing a lot of salt and fat, the consumption of which has increased significantly.
In accordance with the principle of VAT neutrality, the tax must not distort competition. However, if implemented, the Government's proposal will significantly distort competition in indulgence products and thus conflict with the EU principle.
"At this stage, we are not yet in a position to comment on how the plan presented by the Government will affect our business more broadly or on our decision to invest in a new chocolate factory, but we will have to seriously weigh our options." Vitzthum continues.
In Finland, the same reduced VAT rate of 14 per cent has been applied to all foodstuffs, and foodstuffs have not previously been separated within the group. The differentiated rate for some foodstuffs would differ from the VAT system in other EU countries. As the VAT system in the EU is highly harmonised, there is a risk that the tax treatment would not comply with EU law. A confectionery tax was in use in Finland from 2011 to 2017. In 2017, the Government decided to abolish the tax, as, according to the European Commission, the tax was contrary to state aid rules, distorting competition between similar products.
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Fazer Group
Fazer, The Food Experience Company, enables people to enjoy the best moments of their day. Our mission, Food with a purpose, builds on our strong more than 130-year heritage, consumer first approach and innovations to create the sustainable food solutions of the future. With our dedicated team of approximately 5,000 professionals, we focus on fast-moving consumer goods and our direct-to-consumer business in Northern Europe, and beyond with exports to more than 40 countries. Fazer’s operations comply with its Code of Conduct that is based on the Group’s values and the UN Global Compact. In 2023, Fazer Group had net sales of 1.200 million euros.
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