Grocery VAT cut to bring minor savings for Finnish consumers

By admin On Apr 25, 2025

Customers at Prisma in the Jumbo shopping centre in Vantaa. Photo: Emmi Korhonen / Lehtikuva

The Finnish government’s plan to reduce value added tax on food by half a percentage point is expected to yield minimal savings for consumers, unless retailers fully reflect the cut in their prices.

The VAT rate for food would drop from 14 percent to 13.5 percent. For a single-person household spending an average of 63 euros on groceries per week, this translates to a saving of around 31 cents. A two-parent family with two children, spending roughly 184 euros weekly, would see a saving of 92 cents.

Over a full year, the savings amount to approximately 16 euros for an individual and 48 euros for a family, based on spending data from Statistics Finland.

The move, announced as part of a broader tax package, is expected to cost the state around 145 million euros annually. Sales of food items under the current VAT rate generated about 3.1 billion euros in state revenue last year.

But these projections depend on retailers adjusting prices accordingly — a point that has raised concerns.

Juha Beurling-Pomoell, secretary general of the Consumer Union, questioned whether the benefits of the tax cut will reach consumers.

“I’m sceptical whether the VAT [reduction] will be fully included in food prices,” he told Yle, warning that retailers might absorb the savings into their margins unless customers remain vigilant.

He noted that previous VAT changes typically led to modest short-term price reductions, with prices returning to earlier levels over time.

Finland’s food prices have increased by around 20 percent since the beginning of the war in Ukraine, according to national statistics.

Prime Minister Petteri Orpo’s government earlier raised the general VAT rate from 24 percent to 25.5 percent. The current food VAT proposal is intended to offer some relief after this broader increase.

Retailers have responded to the government’s announcement with cautious support.

S Group, which operates supermarkets such as Prisma and Alepa, said VAT changes are usually passed on to consumers, but highlighted the influence of dynamic pricing and other market variables.

S Group’s head of grocery trade, Sampo Päällysaho, said the tax cut would “likely strengthen purchasing power” but did not guarantee uniform price drops.

Kesko, the operator of K-Citymarket and K-Supermarket chains, estimated that the VAT reduction would bring a direct 0.44 percent decrease in food prices.

German-owned Lidl Finland also confirmed it would pass on the VAT cut, but flagged that the change will require extensive administrative work to adjust pricing systems.

The government’s goal of lowering food costs follows a period of high inflation and growing pressure on household budgets. Still, the effectiveness of the VAT cut may hinge on the transparency and cooperation of the country’s leading retailers.

Source: www.helsinkitimes.fi