The British government was able to claim an unlikely early victory at the EU summit on migration tonight (17 March), after securing a tax break on tampons.
UK Prime Minister David Cameron convinced other leaders to back a European Commission move to introduce more flexibility in EU VAT rules. The European Council conclusions made specific reference to sanitary products
That public relations masterstroke was hailed as a sign of Britain’s ability to wring change out of Brussels, as the campaigning over the referendum on the UK’s EU membership heats up.
The so-called Tampon Tax has been a controversial story in the UK. The VAT rate on sanitary towels is set at 5% in the UK, rather than the 20% standard rate, but campaigners want it lowered to 0%.
The EU found itself embroiled in the outrage, after it emerged the UK could not lower the rate because of 2006 VAT Directive. Under current rules a 0% rate can only be introduced with the agreement of all 28 member states.
But EU officials moved to overhaul the rules, in a sign of the leverage the UK is able to exert in the run up to the 23 June poll.
Next Wednesday, the European Commission will propose legislation allowing all member states to lower VAT on products to 0%, if another EU nation has that rate on the product.
Ireland has a 0% rate on tampons. When EU VAT rules, which require unanimous support from all member states to change, came into force those countries that already had 0% VAT rates were allowed to keep them.
On Wednesday, the Commission will give member states a second option on VAT. That would allow countries to adopt the rates they want on their choice of goods and services, but only if this does not create unfair tax competition or undue complications.
The proposed flexibility became the major story for the British press covering the summit, which aims to thrash out a deal to return irregular migrants from Greece to Turkey.
One senior UK journalist at the summit said, “This is easily the best news story for Cameron on the EU so far.”
The set of EU reforms that Cameron demanded as the price for his support for the Remain campaign met with, at the very best, a lukewarm reception in Britain.
The conclusions read, “[The Council] welcomes the intention of the Commission to include proposals for increased flexibility for member states with respect to reduced rates of VAT, which would provide the option to member states of VAT zero rating for sanitary products.”
A Commission spokeswoman said, “EU VAT rules are not imposed by the European Commission. They are decided on and agreed unanimously by Member States.
“Contrary to some media reports, tampons do benefit from reduced taxation. This reduction is possible due to the flexibility built into the so-called ‘VAT Directive’.
“The list of supplies that can benefit from such reduced rates was agreed in the negotiation of this Directive by all EU member states, including the UK.”