Reduced VAT for restaurant dinning in Finland reportedly failed. Could constrict Swedish own similar policy.


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Wednesday, 07 September 2011
The Swedish government wants to halve VAT for restaurant consumption next year to so as to the consumer prices in order to create jobs.

Report of a similar policy in Finland suggest that reduced restaurant VAT will not lead to lower consumer prices, but to greater profits for businesses, according to a new evaluation carried out there.

The evaluation notes that only a third of all restaurants in Finland lowered there consumer prices after the restaurant VAT was cut from 22 to13 percent on 1 July last year, reports Radio Sweden.


It was mostly the big restaurant chains and members of the Tourism and Restaurant Association, which saw reduced prices in full. Most people who eat in restaurants did not see their prices cut at all.

“When it comes to restaurants, which we have looked at short-term price changes, it was found that about one third of the tax cut will go to lower consumer prices. Much of it has instead gone to companies, corporate profits,” says Iida H´┐Żkkinen Skans, an economist at the Ministry of Finance in Stockholm, to the radio Sweden.

In Sweden, the Government wants to halve the restaurant VAT rate from 25 to 12 percent in 2012. It is expected to be able to lower consumer prices, which will get people to eat more out, and that the number of jobs in the catering sector in this way will increase. The Government believes that the VAT reduction could create 6,000 new jobs.

Finland has still not figured out how many new jobs have been created by the tax cut last year. But a reduction of VAT for these services in 2007 shows that the effects were barely measurable. Authorities there are not discussing raising the VAT for hairdressers again.
By Team

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