Brexit Update – Axing VAT Discrimination

By Fatima Mumtaz


THE LAW

Previously, the UK were bound by the 5% levy imposed on women’s menstrual sanitary products, as they were deemed ‘non-essential’ items.


Although the government included a provision in section 126 of the Finance Act 2017 approving a 0% rate of tax, the UK was still a member state of the EU. This meant that they were bound by the EU VAT Directive (2006/112/EC), aimed at harmonising tax law across participating member-states.


Generally, under the directive, VAT between 0-20% is charged on the supply of all goods and services, unless exemptions apply.


There has been a long-running campaign on protecting sanitary products. Activists argue that imposing such an unduly charge, disproportionately discriminates against women, labelling it as ‘tampon tax’. No one chooses to be born as a girl and this only seeks to add unnecessary burdens. Why are women being taxed for products essential to their health and existence?


Additionally, Bridget Crawford in her article, posits that tax reform is an essential tool in achieving both gender equality and human rights. She suggested that all local and national governments should engage in gender-based budgeting to achieve gender equality and justice in taxation.


Also, the European Commission in 2018 published proposals to change the VAT rules, allowing member states discretion to stop such a tax levy. However, this is pending approval by all participating countries.


TIMELINE

  • The UK voted to leave the EU on 23/06/2016 with a 52% majority referendum.

  • The UK’s formal departure from the EU was on 31/01/2020. This included a Withdrawal Agreement.

  • During the transition period (negotiating the terms of a new UK-EU relationship), the UK was expected to comply with all EU law including adhering to VAT law. The UK was considered to be a de-facto member of the EU Single Market and Customs Union.

  • 31/01/2020 marked the end of reaching a trade agreement. Now, EU legislation incorporated as domestic legislation continues to apply.


OUTCOME

The Chancellor of the Exchequer, Rishi Sunak, announced in the 2020 Budget that effective from 01/01/2021, there is now a 0% VAT on feminine products. HMRC’s guidance for manufacturers, wholesalers or retailers can be found here. It remains to be seen when supermarkets and stores respond accordingly to such products, as there appears to be little difference in their sales’ pricing.


REALITY

Campaigners embraced the news with open arms e.g. Laura Coryton stated it was ‘about ending a symptom of sexism’. She also expressed that ‘it is just frustrating that the tampon tax is being used as a political football in terms of Brexit’. Therefore, these efforts should be to level the playing field and achieve a neutral taxing system rather than misguided politics.


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