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European Debate on Future of VAT

 

[30. 3. 2011] AGF claims reduced VAT rates for products and services for children in its contributions to the current EU-consultation.

 

The EU-consultation 'Greenpaper on the Future of VAT - Towards a simpler, more robust and efficient VAT system' will run until 31 May 2011. The questions are not only about collection methods, procedures and reducing bureaucracy, but also, by the way, about the abolishment of reduced VAT rates.

 

In its answers to the green paper, AGF has taken a stand early and argued for the retention of a reduced VAT rate. We claimed further the reduction of VAT for products and services for children to relieve families from financial pressure and to support the good and healthy growing up of children.

 

Without a reduced rate of VAT, prices for the basic necessities of life would increase significantly. This, would especially burden persons with low incomes as well as families with middle and low income, single-parent families and large families. They incur additional consumption expenses, for the raising and care of their children, which cannot be restricted any further. If the reduced rate of VAT were to be abolished, those families with children would be seriously affected by the additional costs. This would be a wrong political signal in view of the social contribution that families provide everywhere in Europe.

 

In many European countries, the reduced rate of VAT was introduced based on socio-political reasons. It should be retained so as not to endanger the secure provision of basic goods in low-income households as well as for families with children. The reduced rate of VAT makes a significant contribution in assisting the socially disadvantaged towards easier participation in social and cultural life. The retention of reduced VAT rates can reduce poverty. It is a clear sign from the governments, that they take the difficulties of persons with low income and of families seriously.

 

As regards the financial burden on families, the AGF considers that the VAT on products and services for children needs to be reduced. Products such as baby diapers, children's clothing, baby carriages and other articles of typical children's needs are among the main necessary purchases in the maintenance of children. The good and healthy growth of children is a social necessity. Their needs are among the basic needs of our society, they should therefore be considered in the policy.

 

For families, a reduction on the rate of VAT on children's products would be of effective support. AGF calculations have shown that with the reduction on VAT, savings of approximately 200 € can be achieved on baby purchases. Above and beyond this financial relief, the reduction of the VAT rate on products and services for children would be a visible sign of an appreciative acknowledgement of the families’ merits, as well as of more family friendliness in Europe.

 

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