Entrepreneur and former advisor at Christiansborg: Abolish VAT on recycling
Politicians have the first piece that could trigger a domino effect for the spread of secondhand: the abolition of VAT on used goods. This is what Jesper Svarer, founder of the secondhand universe Grade A Copenhagen, writes in this debate post.
We Danes love shopping for clothes. In fact, we love it so much that our consumption of clothes and shoes is 35 percent higher than the average in the rest of the world . It may sound like an innocent hobby, but the overflowing wardrobes are a heavyweight climate culprit. Clothing production thus accounts for one tenth of the world's total CO 2 emissions, which is remarkably more than aviation and shipping combined.
The numbers speak for themselves: We need to change our consumption habits. Buy less new clothes, buy better quality clothes that last longer and last longer, but not least we need to consume far more used clothes. Something we are far too bad at, despite the urgency of the climate crisis.
In a survey conducted by the Danish Consumer Council Think, 64 percent of Danes responded that they do not even consider secondhand when shopping for clothes. The situation is particularly bad among Danish men, where only 17 percent have shopped for secondhand clothes within the past year ( DBA's Recycling Index 2022 ).
So even though more thrift stores have appeared on the streets in recent years, the real popular breakthrough for secondhand shopping has not happened.
The responsibility lies not only with consumers, but also with businesses and politicians, who, in my opinion, have failed to translate a highly salient climate agenda into significant changes in consumption.
The traders have been too poor to develop concepts that can actually compete with classic clothing stores, and which are therefore scalable to segments other than the thrift hunter and the particularly climate-conscious. From my past as an advisor at Christiansborg (for Morten Messerschmidt, DF. Ed.) I know for a fact how big a buzzword 'security' is among the Danes. If secondhand is to be made mainstream, the only difference between going to Magasin or to Grade A Copenhagen should be the origin of the clothes - and well - the price of course.
Why impose a tax on circular businesses?
It is precisely the prize that leads me forward – or rather back – to Christiansborg.
An analysis conducted by the Danish Chamber of Commerce showed in March that it is the expectation of a good price that tempts Danes to buy used goods. It is all the more surprising that the state, as it is today, levies a tax on the profit from the resale of used goods, the so-called used goods VAT scheme.
In and of itself, the second-hand VAT scheme is well-intentioned. Second-hand shops almost never purchase goods with VAT on them, which makes it difficult to do business on normal terms with purchase and sales VAT. Therefore, these companies have been given the opportunity to use the second-hand VAT scheme, where VAT is paid on the profit instead.
But why actually impose a tax on circular businesses when they are part of the solution to the climate crisis?
The blouses, trousers and blazers I sell in my shop have already been subject to VAT once in their lifetime. Abolishing the used VAT would not only give second-hand goods a competitive boost, it would also send a clear signal to consumers. And considering how little revenue the scheme generates for the state treasury and how big a climate problem clothing waste is, it can only go too slowly.
I have therefore asked citizens' proposal to abolish the used VAT scheme , just as I have reached out to several politicians. If we are to achieve the goal of the green transition, there can be no doubt that circular business models are the future. This should of course also be supported politically.
