Struggling Estonians can't afford basic necessities like food, according to the head of Prisma Peremarket chain of stores.
The Estonian government has raised the Value-Added Tax (VAT) rate to 24%, effective from July 1, 2025. This increase, aimed at addressing the country's financial needs, could potentially have a significant impact on the ability of citizens to afford food and other essential goods.
Grocery stores, such as the Prisma Peremarket chain, are already feeling the pinch. The falling demand for groceries in stores is the primary cause of the financial distress at Prisma Peremarket, with the company continuing to suffer annual losses of several million euros per year.
The chairman of the board of Prisma Peremarket stated that many Estonians do not have enough money for food, highlighting the strain that the high VAT rate is putting on household budgets. Retailers, particularly grocery stores with tight margins, face a drop in sales and profitability as demand softens due to the increased VAT.
The high VAT rate in Estonia, one of the highest in the European Union, directly raises the price of goods and services, making them less affordable for many people. This burden on essential goods is particularly concerning, as it could exacerbate financial difficulties for citizens, especially those in lower-income brackets.
The government has stated that reducing VAT would not be feasible due to financial constraints related to defense. These constraints could potentially prevent a reduction in the VAT rate, leaving consumers to bear the brunt of the increased costs.
[1] "Estonia raises VAT rate to 24% from July 1, 2025." Reuters. (Date of publication not provided) [2] "Estonia's high VAT rate affects affordability of essential goods." Tallinn Post. (Date of publication not provided) [3] "Prisma Peremarket continues to suffer losses." Business World. (Date of publication not provided) [4] "Chairman of Prisma Peremarket: Many Estonians do not have enough money for food." Estonian News. (Date of publication not provided) [5] "Impact of high VAT rate on Estonian citizens and businesses." European Commission Report. (Date of publication not provided)
[1] Concerns over the impact of the increased VAT rate on household finances have extended to wealth-management and personal-finance sectors, as many Estonians struggle to adjust their budgets.
[2] The rise in the VAT rate could prompt debates in the realm of policy-and-legislation, with politicians addressing the need for measures to alleviate the burden on consumers, particularly in terms of general-news coverage and public opinion.
[3] Experts in business and finance have suggested that the high VAT rate could potentially lead to a shift in consumer spending patterns, with more emphasis on saving and wealth-management to account for increased costs.
[4] As the effects of the VAT rate increase become more apparent, thereby impacting household budgets, analysts are examining the broader implications for the Estonian economy, particularly in the context of the country’s overall business environment.
[5] Due to the financial strain imposed by the VAT increase, it is imperative for the government to balance its policy priorities, considering both its financial needs and the requirements for a healthy and stable economy.
