EU Confirms British Women Will Still pay Tampon Tax if Remain

Responding to the publication of the European Commission’s action plan on value added tax (VAT), Anne Marie-Trevelyan MP said:

“I am appalled that the European Commission continues to treat the British people with contempt. Despite the Chancellor’s best efforts, he and the UK Government are powerless to make a minor alteration to our tax code without the EU’s permission. Now we learn that, despite a pledge to scrap the tampon tax, women will still be charged VAT on sanitary products, and any attempt by the UK Government to zero-rate them could be vetoed by any of the 27 other member states even after the referendum.

This is a minor change requested at the personal intervention of both the Chancellor and the Prime Minister and still the EU says no.  Losing control of our taxation is a failure of democracy. We need to take back control and vote to leave this failing political project.”

The Commission has announced that British women will still be paying the tampon tax after the referendum, despite Government claims to have ended the tax.

• The Commission communication does not mention the 5% rate of VAT which must currently be charged on sanitary products.

• The Commission states that ‘reform of VAT rates’ will not occur until ‘2017’.

• This means that any proposals to abolish the tampon tax could be vetoed by any member state after the referendum.

• As the Treasury Minister, David Gauke MP, has admitted: ‘any change to EU VAT law would require a proposal from the European Commission and the support of all 28 member states. Without that agreement, we are not permitted to lower rates below 5%’ .

• This contrasts what the Chancellor of the Exchequer, George Osborne, has claimed: ‘We’ve used our seat at the top table in Europe to secure what the British public has demanded – common sense on VAT and an end to the tampon tax’.

The UK will also still be obliged to increase VAT on the installation of solar panels and other energy saving products.

• The Commission communication does not mention the VAT on the installation of energy saving products.

• On 4 June 2015, the European Court ruled that the UK’s reduced rate of VAT of 5% on ‘energy saving materials’ was contrary to EU law .

• The Government is now proposing to raise VAT to 20% on energy saving materials, which will cost the sector £310 million between 2016-2017 and 2021-2022.

• This is in direct breach of the ‘VAT-lock’ contained in the Conservative Party Manifesto; Finance (No.2) Act 2015, s. 2(4).

The Commission admits the ‘single market’ has failed businesses for decades. The EU institutions are too sclerotic to respond to the challenges of the twenty-first century.

• The Commission admits that ‘Compliance costs are significantly higher in single market trade than in domestic trade’.

• The Commission admits that ‘the current VAT system is fragmented, complex for the growing number of businesses operating cross-border and leaves the door open to fraud’.

• The Commission suggests that VAT revenue not collected amounts to €170bn and acknowledges that ‘cross-border fraud alone accounts for EUR 50 billion of revenue loss each year’.

• It states that: ‘The current system is also struggling to address innovative business models and technological progress in today’s digital environment’.

• ‘The current rules for VAT came into force 23 years ago’. Their problems have been known about for years. VAT fraud was so large ten years ago it was distorting the UK’s balance of payments statistics. The British taxpayer has lost billions due to the sclerotic nature of the EU institutions.

The Commission admits that its proposals will result in an increase in red tape.

• The Commission acknowledges that its option of abolishing the list of goods and services eligible to reduced rating will not result in a decrease in red tape: ‘Member States would remain constrained by EU legislation, such as single market or competition rules’.

• The Commission says it would use this option as an excuse to introduce more red tape: ‘this option would require safeguards to be put in place… The freedom to set VAT rates should be thus accompanied by a number of basic rules framing the cases in which reduced rates may be applied’.

This proposal will not make it easier to lower VAT.

• The Commission puts forward two options to reform VAT. Neither would give the UK Government the power it needs to lower VAT unilaterally. The Commission is clear that: ‘General derogations to the principles of the EU VAT system are not possible under the current VAT rules. The Commission therefore rejected these requests on legal grounds’.

• Under option one, ‘the minimum standard rate of 15% would be maintained’. In order for a good or service to be added to the reduced rate list, the Member State would need the permission of the EU institutions: ‘The Commission, with the support of the Member States, would analyse whether such changes would pose any risk to the functioning of the single market or distort competition, and would report its findings before any change’.

• The Commission suggests that its second option could mean that it would become impossible to lower VAT rates on certain items: ‘one possible solution could be to prevent application of reduced rates to high-value goods and services, in particular easily transportable items… the total number of reduced rates allowed by Member States could be limited’.

Vote Leave on June 23 to take back our country.