From Mr P. E. Carter, MRPharmS
SIR,—The Value Added Tax on sanitary protection products is being reduced to 5 per cent on January 1, 2001. Why has no one at the National Pharmaceutical Association complained? Zero-rated products create much extra paperwork for retailers.
Why could VAT on sanitary protection products not simply be reduced to zero, or left at 17.5 per cent?
Peter E. Carter Newcastle upon Tyne
Mr JOHN D'ARCY (director, National Pharmaceutical Association) replies: The NPA did make clear to Customs and Excise its concerns about the introduction of a 5 per cent rating on sanitary protection products. We told them that we favoured zero rating of these products and pointed out that because the majority of NPA members used the direct calculation scheme for VAT, they would experience accounting difficulties when the new rate is introduced. The application of a special rate for a limited range of products will create administrative and logistical difficulties for community pharmacists.
But it must be recognised that Customs and Excise is "over a barrel" on the introduction of the new rate. There is a strong lobby arguing that the existing 17.5 per cent rate on sanitary protection products is too high. Critics argue that the high rate discriminates against women, is an additional and unfair burden on families and places a tax on items essential to hygiene. In response to this, Customs and Excise consulted in June last year on a number of options. Among the options — and the one favoured by the NPA — was a zero rating of sanitary protection. Unfortunately, Customs and Excise is unable to implement this option because the UK Government has agreed with its counterparts in Europe not to introduce any zero rates. Furthermore, a reduced rate of 5 per cent is the lowest Customs and Excise is permitted to go to in line with the EC 6th VAT Directive.
So, the 5 per cent rate is the one we are stuck with. This of course means that women using sanitary protection will see a
saving on the price of these products. But the new rate will create difficulties for pharmacists.
Against this background we have asked Customs and Excise to adopt, over a reasonable transition period, a flexible and helpful attitude toward NPA members in getting to grips with the new rate. For NPA members using the direct calculation scheme for accounting for VAT, we have produced guidance for dealing with the new rate which will be included in the December Supplement.