The significant growth of the second-hand market is an important development, offering the opportunity to move away from a take-make-waste mindset and towards reducing the clothing industry’s harmful impact on climate and the environment. To accelerate this shift, STICA is calling on the Swedish government to lower VAT on second-hand sales.

According to the Swedish Chamber of Commerce’s Pre Loved-Indicator, more and more consumers are discovering the benefits of reusing fashion. The second-hand market is expanding rapidly and reached a total of SEK 16.9 billion in Sweden in 2024 alone. Fashion is the single largest category, accounting for SEK 4.7 billion in turnover.

This trend is a positive step in efforts to reduce the fashion industry’s environmental footprint. However, newly produced goods and linear business models continue to dominate the market. Circular alternatives – such as repair services, clothing rentals, subscription models, and second-hand sales – are only effective when they replace the consumption of new products. When this substitution occurs, studies show significant reductions in greenhouse gas emissions, water use, and chemical pollution.

Within STICA, 54 Scandinavian apparel and textile companies have committed to reducing their greenhouse gas emissions and regularly reporting on their progress. These signatories identify profitability as the greatest barrier preventing circular business models from competing with traditional ones, which in turn discourages investment and innovation in circular solutions.

A recent survey of STICA’s signatories shows that:

• 72% see circular business models as a key part of their climate transition plans.

• 65% have already launched some form of circular business model.

• 46% have not yet calculated the potential revenue from circular business models by 2030.

• Of those that have, most estimate that only 1–5% of total revenue will come from circular models by 2030.

The fashion industry accounts for an estimated 2–4% of global greenhouse gas emissions. Since the greatest environmental impact occurs during the production of new garments, circular business models are essential to reducing that footprint. While the industry bears significant responsibility to drive this transformation, the transition is currently hindered by unnecessary administrative burdens and double taxation.

Second-hand sales often entail higher costs per item due to logistics and administration. In addition, garments are subject to VAT at every sale – first, second, and third – reducing margins and creating regulatory complexity for companies operating in Sweden.

It is unreasonable for a garment to be taxed at the same level each time it is sold. A straightforward and impactful solution is to reduce VAT on second-hand clothing so that taxation better reflects the lower environmental impact of reuse. STICA therefore proposes that the government lower VAT on second-hand sales to 6% in the 2026 national budget, while also engaging with the EU to expedite alignment.

Lowering VAT on second-hand sales would improve business incentives, make reuse more affordable for consumers, and align with the government’s ambitions for a circular economy. It would also send a strong signal to both industry and consumers: reuse must be prioritized.