The Belgian retail sector would have done well without a tax reform which aims to abolish the VAT rates of 6 and 12% in favor of a rate of 9%. Admittedly, a 0% VAT rate is well envisaged on fruit and vegetables in particular, but it will not be enough to compensate for the widening price gap between Belgium and neighboring countries.
France is still at the top of the countries where many Belgians have become accustomed to shopping. And the decision that French distributors have just taken to compensate for inflation is one more stone in the shoes of Belgian distributors. While negotiations with suppliers ended at the end of February, distributors have agreed not to make a margin on a selection of products. The economy and trade ministers have reached an agreement with supermarkets and are organizing an “anti-inflation quarter”: during these three months, retailers will offer hundreds of products at the “lowest possible prices”.
All the brands participate in it except E. Leclerc, which believes that it already offers the lowest prices and invites consumers to compare the prices of the different brands to find out. At Carrefour, some 150 products will be affected System U also reduces the prices of 150 references by 15 to 20%. At Intermarché, 500 items will be affected, the brand having announced that this action will cost the group nearly 100 million euros.
Belgians have never spent so much abroad: more than half a billion on food and drink purchases
“Are our decision-makers finally going to react to stop the bleeding?”
This is enough to further strengthen the competitiveness and attractiveness of French supermarkets. In Belgium, on the other hand, one has the impression that the government hardly cares regarding the difficulties of large retailers and the measures taken, particularly in tax matters, are hitting market players harder every day. “Are our decision-makers finally going to react to stop the bleeding?” asks Carole Dembour, economist at FEVIA. “The figures we obtained from the GfK research office reflect this sad observation. Nearly one in five Belgians regularly crosses the border to do their shopping, first in France then in the Netherlands and finally in Luxembourg and Germany. We’ve been alerting the government to this ever-worsening phenomenon for years and it really feels like they don’t care. When we see the proposal on the table, particularly in terms of VAT, the packaging contribution or the cost of litter, it is once once more the distribution sector, but also the producers or farmers who will toast.”
In 2022, Belgians spent 543 million euros on the other side of our borders. “And this figure is probably underestimated because we only have data on food purchases. But it is clear that a consumer who goes shopping in France also comes back with other products such as washing powder or hygiene products. In 2019, we were thus able to quantify cross-border purchases at 800 million euros. With the proposal to raise VAT to 9% on food (excluding fruit and vegetables) and non-alcoholic beverages, cross-border purchases of fast moving consumer goods will very quickly reach one billion euros. It is therefore millions of additional euros that the Belgian State, and our companies, will see slipping abroad.
As for the increase in revenue expected by the State by raising the VAT rate to 9%, Carole Dembour believes that the amount put forward by Minister Van Peteghem is totally utopian. “The standardization of VAT rates from 6% and 12% to a rate of 9% is supposed to bring in 1.777 billion euros, of which 800 million in the food sector, the rest being borne by the construction sector. But this amount is calculated on the basis of consumption and purchases identical to those made in 2022. If we lived on an island, at the limit, this utopia might have a chance to materialize. But this is far from being the case because we are in a small country where half the population lives less than 50 km from a border. Moreover, many Belgians own a company car and therefore do not even bear the cost of travel. Seeing prices rise here will therefore only accentuate the already significant gap with prices in our neighbours. You can’t blame the consumer. Especially in these difficult times, if he can save a few euros by shopping elsewhere, he does not hesitate. It is therefore estimated that cross-border purchases will further increase with these measures and that, therefore, the expected tax revenues in Belgium will not be achieved either.”
