Politics & Law

Could a VAT Reduction for Plant-Based Milk Be On the Cards?

ProVeg International, together with the Good Food Institute (GFI) Europe and the Federal Association for Alternative Protein Sources (BALPro), has approached politicians from the SPD, the Greens, and the FDP in Germany to support the VAT debate that has flared up again. If the campaign is successful, it could pave the way for other countries to follow suit.

MPs Tim Klüssendorf (SPD) and Bruno Hönel (Bündnis 90/Die Grünen) are calling for a reduction in VAT on plant milk – to the reduced rate of 7 percent from 1 January 2024, which corresponds to the current taxation of animal milk. MP Till Mansmann (FDP) even suggests a fundamental revision of the VAT law.

ProVeg, the GFI, and BALPro have written a joint letter to the politicians expressing their support for the demanded tax reduction. “We stand behind the MPs’ demand, because every step forward relieves the climate and the budgets,” explains Matthias Rohra, Executive Director of ProVeg Germany. The demanded alignment of tax rates finally reduces climate-damaging subsidies, the organisations emphasise.

Alpro Not M*lk
©Alpro

The Ampel politicians fall short of the demand for a complete VAT exemption, for which ProVeg has been campaigning since November 2022 with the “0% for the climate” campaign. But their timing shows that they are serious, explains Jana Gandert, policy officer at ProVeg Germany: “Berlin is currently discussing the budget law. The demand for a reduction in VAT on plant milk is concrete, comprehensible and makes sense in terms of economic policy.” Like Klüssendorf, she thus sees good chances for a majority in the traffic light coalition for the VAT reduction for plant milk. Gandert justifies the position of the food organisation accordingly pragmatically: “ProVeg stands for tangible changes in our food system – here is a very good opportunity to do so.”

Parity as a minimum requirement

Since the amendment of the European VAT system directive, a tax reduction to 0 percent is also possible. As part of the “0 % for the climate” campaign, ProVeg is calling for such a VAT exemption for all plant-based foods, including plant-based alternative products such as plant milk – to protect the climate and relieve the burden on households given the high price increases in the retail sector. Neighbouring countries like Belgium, Denmark, France, and the Netherlands already tax plant and cow milk at the same rate.

Plant-based milk shelf at Albert Heijn
Image: ProVeg Netherlands

With their demand, the politicians underline what the market development has been confirming for a long time: plant milk has long since become the driving force of the entire industry, not only in the USA. Across Europe, plant milk accounts for 11 percent of sales in the dairy segment. Between 2020 and 2022, sales increased by 20 percent, while sales of animal milk fell by 9 percent. In Germany, plant milk even has a 13 percent share of the dairy market. Sales of plant milk increased by 43 percent between 2020 and 2022, while sales of cow’s milk fell by 12 percent. Plant milk is thus also the most popular product category in the plant-based sector in Germany.

“Any tax discrimination against plant-based alternatives threatens to slow down the momentum in this promising growth sector”

The market for plant milk is not only recording double-digit annual growth rates, but is also characterised by a particularly high level of innovation and great connectivity: “Plant milk is not only climate-friendly, but also delicious, varied and versatile – and thus popular with people of all dietary styles,” states Dirk Liebenberg, Senior Project Manager Food Industry & Retail at ProVeg Germany. He adds: “Any tax discrimination against plant-based alternatives threatens to slow down the momentum in this promising growth sector.”

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