A research team from the Oxford Martin School and the Environmental Change Institute has examined the potential effects of modifying Value Added Taxes (VAT) to encourage healthier and more sustainable dietary habits in the UK and other European countries.
Their paper, which appeared in Nature Food, outlines a proposal to impose standard VAT rates on meat and dairy products while exempting fruits and vegetables. This approach aims to improve dietary health, enhance environmental sustainability, and boost government revenue.
The study indicates that such VAT changes could lead to an average increase of one portion of fruits and vegetables per week, accompanied by a corresponding decrease in meat and dairy consumption. In the UK context, where basic food items generally have a zero VAT rate, the consumption of meat and dairy products might fall by up to two portions each.
By analysing current VAT rates in the UK and EU, the researchers assessed the economic, environmental, and health implications of their proposal. Their findings suggest that implementing these VAT reforms could substantially benefit public health, potentially reducing diet-related diseases and resulting in 170,000 fewer deaths across the UK and EU, with more than 2,000 of those prevented in the UK alone.
Environmentally, the shift towards more plant-based diets could cut greenhouse gas emissions by over 50 million tonnes of carbon dioxide equivalent and reduce the demand for agricultural land by more than 70,000 km². Specifically for the UK, the transition could mean a reduction of 16 million tonnes of emissions and the freeing up of over 20,000 km² of land from agricultural use, as well as less water pollution.
The research also suggests that despite these shifts in dietary habits, consumers' overall expenses would remain steady because the more expensive meat and dairy would be replaced by more affordable fruits and vegetables. Moreover, the proposed VAT adjustments are expected to increase government revenues by around US$45 billion, equating to 0.2% of GDP, with the UK's revenue growing by 0.6% of GDP.
Professor Marco Springmann, the study’s lead author, stressed the importance of updating the tax system to tackle the health and environmental issues arising from the current food system. He states the need for "a modernised tax system that addresses the health and environmental challenges posed by the current food system."
He further advocates for adjusting VAT rates based on health and environmental impacts as a well-rounded policy measure that would benefit public health, the environment, and government finances.
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