alt textFinance Minister Walters announces the abolition of VAT on basic necessities
by Frances Irving - September 24, 2022
This morning, Finance Minister Tobias Walters revealed a plan to eliminate value-added tax (VAT) on basic necessities, such as groceries, drinking water and hygiene products. The plan covers a wide range of products that are defined as "necessary to keep the physical well-being of a person". Some of the products included in the 500-item long list are fruits and vegetables, dairy products, and meat, as well as sanitary products like pads, tampons, and toilet paper.
"With abolishing taxes on essential products, we plan to ease the weight of the cost of living for Elthics," Walters stated. "Poverty and income inequality remain a problem in many areas of Elthize. While this will not solve the problem completely, it will be valuable, especially for the lower middle class and the unfortunate."
Currently, there is a value-added tax of 7%, applied equally to all products. According to the plan published by Walters, from 2023 onwards, the VAT on basic necessities will drop to 3,5%, and in 2024, it will be gone completely. To counter this measure, the VAT on products and services that are not considered basic necessities will be raised to 12% in 2023. In addition, there will be a VAT rise on a set of luxury products, though details regarding that were not announced by Walters.
The plan was not a part of President Greenwich Grimwald's 2022 reelection agenda. However, it is believed that the plan was influenced by the popularity of the progressive tax, which is a tax system that involves higher taxes on higher income, during the 2022 elections. It is believed by political analysts that The Nationals' support of progressive tax was the reason why they won fourteen seats in the Elthic Parliament, more than anyone else. On the opposite side, New Democracy, which didn't support the plan, lost ten seats in the National Assembly.
The plan is expected to be sent to the Elthic Parliament for discussion in the coming weeks.