Finland’s Fazer Group has kicked out at a government proposal to raise VAT on confectionery, warning consumers might switch to competitor brands.
Under a fiscal plan for 2025-2028, the administration of Prime Minister Petteri Orpo “has agreed” to increase the “general” value-added tax rate from 24% to 25.5%, according to an official statement.
The VAT on confectionery – sweets and chocolate – will be raised from the current 14% into line with the general rate of 25.5% as part of a raft of budget measures described as “decisions that will improve the sustainability of public finances and create conditions for reversing the trend in indebtedness”.
Fazer, which as well as confectionery plays in the areas of bakery and plant-based foods and beverages such as cereal and oat drinks, said the proposal to increase VAT on sweets and chocolate is a “great concern”.
Helsinki-headquartered Fazer suggested other “foodstuffs” are not included in the VAT increase proposal, adding the plan “would treat product categories unequally and possibly steer confectionery consumption towards foreign products and other categories”.
President and CEO Christoph Vitzthum said in a statement: “We are very surprised by this government proposal. The volatility and unpredictability of the political operating environment in Finland as well as regulation, which treats different actors unequally, is very worrying.
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“We have always emphasised and wished for predictable, transparent legislation and an open dialogue with important stakeholders and we have also strived for this in our own operations.”
The company added: “The differentiated rate for some foodstuffs would differ from the VAT system in other EU countries. As the VAT system in the EU is highly harmonised, there is a risk that the tax treatment would not comply with EU law,” Fazer warned.
The company said it was “puzzled” at the decision to single out confectionery, adding that the proposal “completely ignores products containing a lot of salt and fat, the consumption of which has increased significantly”.
Fazer went on: “In accordance with the principle of VAT neutrality, the tax must not distort competition. However, if implemented, the government’s proposal will significantly distort competition in indulgence products and thus conflict with the EU principle.”
CEO Vitzthum added: “At this stage, we are not yet in a position to comment on how the plan presented by the government will affect our business more broadly or on our decision to invest in a new chocolate factory, but we will have to seriously weigh our options.”
Just over a year ago, Fazer downsized plans to consolidate its confectionery operations, citing changes in the “operating environment” and “consumer behaviour”.
A new facility in Lahti, southern Finland, was originally planned to take on the chocolate-producing capacity of Fazer’s plant in nearby Vantaa, just outside Helsinki, as well as sugar confectionary from a facility in Lappeenranta, on the Russian border.
However, due to the inflationary environment and a downturn in consumer spending, Fazer decided to move only its chocolate operations to the new site. Sugar confectionery production remains in Lappeenranta.
