Higher tax set to raise food prices
September 30, 2011
Just months after the left-center government wrapped up an investigation into high food prices in Norway, it’s reportedly prepared to contribute to price hikes itself by increasing the tax on food items. The proposal met immediate opposition but seems likely to move forward.
The government will present its new state budget for 2012 next week, and leaked information is already starting to appear in local media. Norwegian Broadcasting (NRK) reported a budget leak Friday morning that claims the tax on food items will rise from 14 percent to 15 percent.
Consumers foot the bill
“It’s the consumer who in the end pays the higher merverdiavgift (MVA, also known as “moms” or a value-added tax),” Randi Lavik of the state institute for consumer research (Statens Institutt for Forbruksforskning, SIFO) told NRK.
It’s not the first time the Labour-led government coalition, which has been in power for six years, has raised the tax on food. While Norway’s standard value-added tax (VAT) is 25 percent on goods and services, the tax on food items is lower, rising to 14 percent in 2007. The hike at that time raised another half-billion in tax revenues for the state treasury.
Now the government is making an effort to boost revenues again despite its promises of no higher taxes on income or in other areas. Even the head of the farmers’ lobby, Norges Bondelag, called the tax “anti-social” because it hits both families and the farmers themselves. They’re often blamed for Norway’s high food prices because of the huge subsidies they receive and the protectionist policies they enjoy to keep cheaper imports out of Norway.
“It hurts our competitive edge and puts an extra tax on the consumer,” Nils T Bjørke of the national farmers’ organization told NRK Friday morning.
Opposition from the opposition
Health care experts complained a higher tax on, for example, fruits and vegetables will discourage healthy eating. Opposition politicians also slammed it because it, among other things, is a regressive tax that hits people with lower incomes relatively harder than those with higher incomes.
“At a time when there’s talk about how to reduce poverty, this doesn’t help,” said Siv Jensen of the Progress Party. “It’s actually rather petty.”
Prime Minister Jens Stoltenberg of the Labour Party warned earlier this week that his government’s proposed state budget is unlikely to be popular, but claims belt-tightening and new sources of revenues are needed at a time of international economic turmoil.
Jan Tore Sanner, finance police spokesman for the Conservative Party, chided the government’s penchant for raising taxes “for normal folks” but said his party likely would support a higher tax on food if, for example, other taxes are reduced. He also claimed that changes in VAT on food don’t always have an immediate effect on prices at the grocery store.
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