Finance Minister Jurgen Ligi has, in a recent opinion piece (Jurgen Ligi: food prices - on the answers from analyses and on the cure. ERR, 15.08.2025), explained in detail why, in his view, cutting food VAT would not be the right solution. It is clear that the government has a duty to keep state finances in order. But it is equally clear that today's situation is unacceptable to people: Estonian food prices are among the highest in Europe, while purchasing power lags significantly behind the European average.
That is precisely why we cannot consider this topic closed before we have actually tried it and seen what the impact is, both on the consumer and on the state budget.
The reality in stores: prices have run away
Over five years, food prices have risen by nearly 60%. Statistics may argue about the reasons, but the family wallet does not argue. It is a fact that buying food has become increasingly difficult for many families. When we talk about purchasing power, every single percentage point in the price hits the family - especially low-income households. The minister hints that "a low price must not become an obsession". But for food, which is a basic need, it is precisely the price that determines whether a person can afford a full meal or has to go without something.
The European experience is not a myth, but reality
The minister claims that examples from other countries do not apply to Estonia, because their tax burden is higher. True, the systems in European countries differ. But it is equally true that the majority of EU member states have nevertheless found it necessary to lower food VAT. This has not been done out of naivety or because of pressure from "interest groups", but because it helps keep prices more bearable for people. In most European countries, it is not considered fair that the state collects as much money on basic foodstuffs as it does on luxury goods. Taxes are a way of filling the state's coffers, and basic foodstuffs are generally left as an area where the state does not take so much for itself, so that even poorer parts of the population can afford to eat. We cannot claim that all of Europe is wrong and only Estonia has found the right solution.
A pilot project provides answers, not fear
The minister claims that we cannot experiment, because an experiment is hard to reverse. But it is precisely experimentation that would give us the answer to whether and to what extent the price gain reaches the consumer. A pilot project can be designed as temporary and with clear objectives - for example, on a particular product group or for a limited time. If the impact on the consumer is small or the loss to the state budget is too great, then that is an honest and clear argument to end the discussion. As things stand, however, we are told that "we already know", without ever having tried. That is not convincing.
Today, Ohtuleht published a thorough analysis of food prices and VAT effects in Estonia and Latvia using the example of Rimi, the conclusion of which was that "the talk by the coalition parties of profit-greedy retailers does not hold water". The price comparison of products taxed at half the rate in Latvia clearly showed that on average the food items in question are nearly 13% cheaper in Latvia than in Estonia, in a situation where the tax rate in Latvia is 12% lower. The Reform Party has repeatedly argued that the impact of a tax cut on prices would be short-lived. Latvia cut VAT seven years ago, and the price gain is still there in the market. At the same time, competition in Latvia is half as fierce as in Estonia. Minister Ligi refers to analyses that supposedly confirm that lower VAT does not bring food prices down, but having repeatedly asked the Ministry of Finance for these analyses, we have only been shared with one study on the impact of the Latvian VAT cut, which did not conclude that the VAT cut failed to bring prices down. We therefore still do not know which analyses the minister is relying on for his claims, and we call on him to back his arguments up with numbers and references.
The question is not retailers' profits, but consumers' purchasing power
The minister hints that a reduced VAT would end up in retailers' profits. Such a claim does not hold up. Competition in Estonian retail is among the most intense in Europe, profit margins are some of the lowest in Europe precisely because of this competitive pressure, and the price gain inevitably gets passed on to the consumer. If the state were to make clear monitoring and supply-chain price studies a condition of the pilot project, it would be possible to see exactly how much of the VAT cut reaches the final price. The retail sector is ready for such transparent cooperation.
In conclusion
We are not claiming that cutting VAT is a miracle cure. But to claim that it is a ruled-out solution which under no circumstances would work is a denial of reality. Reducing the tax component has the greatest possible potential to bring food prices down. Retail profitability has been at 2% for ten years - there is nothing to take from there compared with the 24% that the state takes for itself.
That is why we call on the government to launch a pilot project - an honest and measurable experiment. Only when we have real results can we say whether cutting VAT works or not. Until then, we should not settle for principled objections and theories that ignore the competitive situation.