This post is an excerpt from Erik SAELENS' column in newspaper Business AM Find the full Dutch version here.
Belgian Minister of Finance Vincent Van Peteghem (CD&V) recently launched the idea of reducing the VAT on fruit and vegetables from six to zero percent. An idea that was approved by coalition partner Groen. “Vegetables and fruits are too expensive for many people to include in their daily diet. By abolishing VAT on fruit and vegetables, we are making a varied diet a lot more accessible to everyone,” said Groen MP Barbara Creemers.
It is true that healthy food is a serious expense for many. We see evidence of this in every crisis: when inflation rises and purchasing power falls – as it is now – many people almost immediately opt for cheaper but also unhealthier eating habits. Take the example of Beyond Meat, which markets plant-based burgers. Since the turn of the year, that company has decreased in value by half. The reason, according to CEO Ethan Brown: the disappointing sales as a result of "inflation pressure", which means that consumers are opting for cheaper forms of protein, such as red meat, which has been scientifically shown to be unhealthier than the plant-based variety. Fruit and vegetables, on the other hand, became six to even thirty percent more expensive last year. The effect can also be guessed here: fewer salads, more frozen pizzas, fewer healthy nutrients, more unhealthy sugars.
Due to inflationary pressures and the resulting choice for cheaper and unhealthier food options, a new social cost will naturally arise in the long term, in particular through diseases (and the associated loss of productivity) and premature deaths. That is the forgotten billion-dollar cost of every economic crisis, of every inflation surge. A cost that is not immediately felt, but continues to work for years. And where the cost of the corona crisis pales!
Already 55 percent of the Belgian adult population is overweight and 21 percent obese, with all the associated health risks: cardiovascular disease, cancer, diabetes, et cetera. Research shows that those in a socio-economically vulnerable situation are much more likely to become obese.
In that respect, not democratizing healthy food is really just culpable omission. Access to healthy food should be a fundamental human right.
Need for a system with real behavioral change
The question is, however, whether a VAT reduction of fruit and vegetables to zero percent will have a sufficient effect? For example, how can one avoid that the producers of the food do not take advantage of raising prices so that it becomes a zero operation? Are we going to get there with a VAT reduction on fruit and vegetables only, if you know that the VAT on chips is the same as that on fish? Is a jar of pasta sauce, with its sugars and oil, a vegetable? Is fruit juice fruit? And how do you ensure that we all start to eat healthier if the consumer is being bombarded with advertising campaigns for unhealthy, cheap food? Is there really anyone who believes that everyone will leave the chips en masse and buy fruit and vegetables instead if the VAT lowers 6%? A bunch of bananas now costs about 1.5 euros. With a VAT reduction to zero percent, that becomes 1.4 euros. Ten cents profit. That will not change your behavior. VAT is a consumption tax, not a behavioral tax. In any case, behavioral change is about the hardest thing there is. Just ask anyone who wants to quit smoking.
A much broader approach is needed. An approach that promotes real behavioral change, that teaches people to eat healthy from an early age, because the nutritional poverty among our children and young people is very high. In Belgium, one in four children grows up in food poverty! After all, unhealthy food is not only often cheaper, it is also usually faster and easier to prepare.
Young people are all too aware that they eat unhealthy food and would change their behavior if healthy food became cheaper, a study of a thousand 18 to 25-year-olds showed a few years ago. The same study showed that the majority of the young people surveyed were open to receiving part of their wages in the form of 'healthy meal vouchers'. Why isn't the government doing that? Replace the current meal vouchers with a closed loop system that allows only healthy products – such as fruit and vegetables – to be purchased. It will have a greater impact than a limited VAT reduction and will above all lead to a sustainable change in behaviour. Moreover, with such a closed system you can also achieve other effects, such as stimulating the local economy, by making the 'healthy meal vouchers' only exchangeable there.
Combine this idea with stricter regulation of unhealthy food advertising, for example requiring manufacturers to put a warning on their ads, and we get the worrying overweight and obesity rates down. In the long run, it will yield more than this VAT measure.