Government plans extensive sugar taxation – commerce sector warns of administrative chaos 

The government is pushing for an increase in VAT on chocolate and confectionery from the current 14 per cent to 25.5 per cent to strengthen the revenue of the state budget. The tax covers several thousand products, which makes it impossible for the companies in the commerce sector to implement it within the time-frame presented. There are also EU legal problems related to the VAT increase.

The Finnish Commerce Federation contends that the government’s proposal should be dismissed and not submitted at all. The tax would be particularly burdensome for retailers that have the responsibility to apply correct tax rates for the products that they sell.

“In large retail establishments, there are up to twenty thousand products subject to tax, and ultimately, the retailers have to determine and confirm the applicable tax rate for all these products, one by one. This would be very cumbersome and create enormous bureaucratic chaos,” says Toni Jääskeläinen, Chief Policy Adviser of the Finnish Commerce Federation.

According to the Finnish Commerce Federation, a company that would need assistance in interpreting the policy would have to request a precedent from the Tax Administration for each ambiguous product. The Tax Administration would then have to consult Customs.

“It is clear that receiving an answer would take a long time, as the Tax Administration and Customs would be congested by the flood of requests for precedents. The government has planned the increase to take effect at the beginning of June, which would not be enough time to even determine the tax rate of all products already on the shelves,” says Jääskeläinen.

The increase is in conflict with EU legislation 

The increase in the value added tax on sweets and chocolate does not treat similar products neutrally and may therefore include state aid for products that are excluded from the tax.

“It is clear that a change in taxation that is so detrimental for companies should already be rejected in the preparation phase. However, if the project continues, it is essential that the VAT increase plan does not move forward without submitting a prior notification to the European Commission,” Jääskeläinen says.

The problems of determining what falls under the increase in value added tax are also demonstrated by the fact that the tax would apply to, for example, xylitol chewing gum, even though many people do not consider it a sweet or chocolate. The oral health benefits of xylitol chewing gum are widely recognised, and in the long term, a tax increase on sweets and chocolate could also have a negative impact on dental health.

For further information, please contact: Chief Policy Adviser Toni Jääskeläinen, toni.jaaskelainen(at)kauppa.fi, tel. 050,533 0619.