“Outdated VAT policy stifles plant-based innovation,” says lobby group calling out “unfair” tax

30 Oct 2019 --- Global food awareness charity ProVeg International is calling for an end to the “unequal and unfair” rates of taxation on plant-based milk, compared with the lower rates applied to cow’s milk. The move coincides with the launch of ProVeg International’s report on plant-based milk, which explores nutrition, market data, legal frameworks and the environmental impacts of plant-based compared to cow’s milk. The report comes as plant-based alternatives, especially for milk, are gaining increased momentum. Consumer demands for more sustainable practices are driving the space, which is prolific with NPD.

“We urge European governments to level the playing field by taxing plant-based milk at the same rate as cow’s milk – at the very least. People are literally paying a higher price for wanting to protect our planet and for being climate-conscious,” says Sebastian Joy, Co-Founder and CEO of ProVeg International.

“National governments can decide the level of the standard value-added tax (VAT) rate and apply up to two reduced VAT rates. Dairy products often fall under a reduced VAT rate, and therefore receive an indirect subsidy, meaning that the tax authority is waiving a part of the taxes. In some EU countries, this results in a fiscal favoring of dairy products over their plant-based alternatives," Joy tells NutritionInsight.

In six countries across Europe, the VAT on plant-based milk is significantly higher than it is on cow’s milk, the food awareness group says. In Germany, for example, VAT on soy milk is 19 percent, but only 7 percent on cow’s milk. This means a 171 percent higher VAT rate for the plant-based milk. The rate is 450 percent higher in Italy, and 150 percent higher in Spain, with Greece, Slovakia and Austria also applying higher VAT rates on plant milk. 

This is despite the dairy industry being a major contributor to climate change, with 1L of cow’s milk requiring more than 22 times more water and roughly 12 times more land (than soy milk?), ProVeg says. In addition, 1L of cow milk is emitting three times more greenhouse gas emissions than 1L of soy milk. Other types of plant milk such as oat and rice milk are also similarly sustainable.

In six countries across Europe, the VAT on plant-based milk is significantly higher than it is on cow’s milk.“We are in the midst of the climate crisis, yet this outdated VAT policy stifles plant-based innovation and competition. It is unfair and inequitable and in urgent need of reform if we are serious about making progress with climate change mitigation,” notes Joy.

“Instead of indirectly subsidizing dairy products that we know to be so damaging to our planet, we ought to be helping, supporting and encouraging more sustainable alternatives such as plant-based milk – not taxing them at a much higher rate,” he adds.

According to Innova Market Insights data, one of the biggest results of the plant-based boom has been the strong rise in dairy alternatives. There has been a 17 percent average annual growth in dairy-free products (Global, CAGR 2013-2017) of these products, which include dairy alternative drinks and spoonable non-dairy yogurt.

Some European countries have however already leveled the difference. The UK, Ireland, Netherlands, France and Belgium are among the countries to apply the same rates of VAT on cow’s and soy milk.

Soy is a staple ingredient across the plant-based alternatives space and previous research has found that nutritionally soy milk is the best plant-based milk. 

Plant-based milk alternatives are entering the mainstream and are recognized for their nutritional value. Recently, the Vegan Society urged UK schools and nurseries to include fortified plant milk in nutritional public health initiatives as part of wider calls for school milk reform. 

“People are switching to plant-based milk for a variety of reasons including health, animal welfare, and environmental protection. It’s not just vegans and vegetarians who are opting for plant milks, we are also seeing meat and dairy reducers, the lactose intolerant and other allergy sufferers, and those who simply enjoy the taste of plant milks, all moving further away from dairy,” Joy says.

NutritionInsight has reported on the trend’s appeal and how the industry is responding by boosting the flavor and texture profile of its offerings.

By Kristiana Lalou