Press Centre

Asda to slash the VAT on fruit juices and smoothies

Starting today, for three weeks, ASDA is slashing the price of all 100 per cent fruit juices1 and smoothies as part of its campaign against VAT laws which penalise people for choosing healthier options.

Equivalent to the removal of VAT, the price cut draws attention to the inconsistencies between the government’s VAT policy and healthy eating initiatives.

Under current UK tax law, people pay zero VAT on ‘essential’ foods and drinks such as milkshakes, frozen pizzas and chips but 17.5 per cent on ‘luxury’ items such as smoothies and 100 per cent fruit juices2, despite the fact that a single serving of these products delivers one of your ‘five a day’.

A recent survey carried out for ASDA revealed that a staggering 88 per cent of customers considered fruit juices to be an ‘essential’ item and should, therefore, have the VAT reduced to five per cent, the minimum allowed under current EU law.

The survey also revealed that if the VAT were removed from 100 per cent fruit juices and smoothies, 70.5 per cent of customers would be more likely to buy more fruit juice and 50 per cent would be more likely to buy more smoothies, as a result of the reduction in price3.

Paul Kelly, ASDA’s corporate affairs director, said: “We have always said that current VAT law on fruit juices and smoothies doesn’t make sense. By rolling back the price of all 100 per cent fruit juices and smoothies, we’re rewarding customers for choosing healthy products, instead of penalising them, as the current law does.

“We all know we should be eating more fruit and vegetables and price often plays a big part in deciding which items to buy. With one in seven children never eating fruit4, we want to show the Government that customers should not be charged a premium on fruit drinks when no VAT is charged on fresh, frozen or tinned fruit and vegetables.”

As well as launching a petition on the Downing Street website earlier this year, the supermarket placed petition books in all 347 stores nationwide.

With over 15,500 signatures in store, and 11,500 online, 27,000 people have signed the ASDA petitions to date, calling on the government to reduce the illogical tax. To sign the petition, visit www.vatsnotfair.com.

100 per cent fruit juices and smoothies can deliver significant health benefits: each 150ml serving contributes towards the Government’s target of at least five portions of fruit and vegetables a day and mounting evidence shows that an increase in the consumption of fruit and vegetables lowers the risk of chronic diseases such as coronary heart disease and some cancers.

Dr. Peter Carter, Chief Executive and General Secretary of the Royal College of Nursing, said: “The Royal College of Nursing is very pleased to join ASDA’s campaign for a reduction in VAT on 100% fruit juices and smoothies in an effort to encourage everyone to adopt a healthier lifestyle. Nurses already play a crucial role in improving the health and wellbeing of patients, and a reduction in VAT on these products would have a positive impact on public health.”

ASDA estimates that the Treasury currently takes approximately £200 million a year from charging 17.5 per cent VAT on fruit juices and smoothies. However, heart disease costs the UK economy £29 billion a year in healthcare expenditure and lost productivity5.

A reduction in VAT on 100 per cent fruit juices and smoothies would also support the Government’s recent ‘Health Weight, Healthy Lives’ paper which announced the launch of a £75 million marketing programme to help parents make changes to their children’s diet and levels of physical activity.

ASDA encourages healthy eating across its product range and recent commitments to this include: becoming the first supermarket to meet the Food Standard’s Agency’s 2010 salt targets for all own-brand products; becoming the first supermarket to remove all artificial colours and flavours from more than 9,000 own-label food and soft drink products and becoming the first retailer to remove hydrogenated oil from all own-brand products.

ASDA is also the only major retailer to have introduced the dual food labelling system, which incorporates both GDA and traffic light labelling.

This campaign follows a series of successful common sense pricing campaigns by ASDA: In 1997, ASDA launched a campaign to stop VAT being charged on tampons and sanitary towels. It cut the cost of its own-brand range by 17.5 per cent and lobbied the Government and European Union ministers to get the tax reduced. In the 2000 Budget, Gordon Brown cut tax on these products from the maximum of 17.5 per cent to the minimum of just five per cent.

The company played a pivotal role in challenging the Net Book Price Agreement, a British price fixing agreement between publishers and booksellers which set the prices at which books were to be sold to the public, meaning that retailers were no longer forced to sell books at recommended retail prices. In March 1997 the Restrictive Practices Court found that the Net Book Agreement was against the public interest and it was ruled illegal.

In 2001 ASDA successfully challenged the pharmaceutical industry on the Resale Price Maintenance of medicines, which gave manufacturers of over-the-counter medicines the right to set the minimum price at which drugs are sold. This practice was abolished in 2001.
1 Includes freshly squeezed, pasteurised, concentrated and long life juices which contain 100% fruit or vegetable juice. Excludes multibuys.
2 Under current EU law, food used for ‘general consumption’ – such as meat, fruit and vegetables and cake – is subject to zero-rated VAT (0%). Food deemed to be a ‘luxury item’ such as alcohol, confectionary and beverages is standard rated (17.5%).
3 Reference: ASDA Pulse of the Nation Survey – September 2008

4 Reference: School Food Trust – August 2008
5 Oxford University Health Economics Research Centre

Posted in Press Centre on 08 September 2008