Our politicians are fighting with passion over who can pull the sustainable lead. There is no shortage of creativity when it comes to ideas for regulating the behavior of citizens and companies using climate taxes. But perhaps it was time for the state to also look inward and consider abolishing the used VAT system. There are strong arguments in favor of this.
The production of clothing accounts for about ten percent of the world's total CO2 emissions, and the consumption of clothing and shoes in the EU alone is expected to increase by over 60 percent by 2030 .
In other words, clothing waste is a heavyweight climate culprit. Although secondhand has been on the rise in recent years, 64 percent of Danes not even secondhand when they shop. I find this surprising at a time when the climate agenda is so pressing to the forefront.
That's why I recently swapped my career as a consultant at Christiansborg Palace for life as an entrepreneur and owner of Grade A Copenhagen. The ambition is to set a new standard for secondhand, so that far more Danes get on board.
Overcoming existing barriers not only requires entrepreneurs with great fighting spirit, but also political action. A new analysis from Danish Business shows that it is especially the expectation of a good price that tempts consumers to buy second-hand. If more consumers are to look in a more sustainable direction the next time their wardrobe needs to be upgraded, financial incentives are therefore a good place to start. Fortunately, there is a low-hanging fruit just waiting to be picked, namely the second-hand VAT scheme.
As it is today, shops that sell second-hand clothes almost never buy goods with VAT on them, which makes it difficult to do business on ordinary terms with purchase and sales VAT. These companies therefore have the opportunity to use the second-hand VAT scheme, where VAT is paid on the profit instead. But why not simply exempt circular business models from the tax? Since the goods are purchased by private individuals, VAT has already been paid on them once. Add to this the fact that second-hand VAT is assumed to constitute a relatively small revenue for the treasury, but its abolition would be a strong signal and driving force for the transition to a more circular economy.
Politicians need to pull in the right direction. And here, carrots rather than sticks are a good way to go, or as they say in the US: Money talks .
