|Authors: ||F.H.J. Bunte, M.A. van Galen|
|Keywords: ||value added taxes, policy evaluation, ornamental flowers and plants|
The EU VAT directive allows Member States to apply the lower VAT rate to flowers and plants.
Because of the economic downturn, governments all over the world try to raise government revenues and to cut back government expenses.
For this reason, some European governments reconsidered the lower VAT tariff for ornamentals.
This paper evaluates the impact of a possible application of the general VAT rate to ornamentals on turnover and employment in the European ornamental flowers and plants supply chain.
In 2014, the lower VAT rate was applied to ornamentals in 13 EU member states.
The impact is estimated using the Hortus partial equilibrium model of Wageningen Economic Research which models demand and supply in European horticulture.
The VAT rate increases are estimated to lead to a fall of 3,795 million euro in turnover in European retail trade and a fall of 1,330 million euro in European ornamental production as well as to a fall in employment throughout the supply chain of 54,700 FTE.
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