[Article] VAT on Children's Shoes and Clothes

Victor

I saw a piece quite some time ago in the SBP on this topic. Teh example used was a basic cheap saucepan (a reasonable necessity) in charged VAT at 21%, whereas a woman buying a pair of size 4 designer running shoes for €100 will pay no VAT. Should the VAT be charged and any income from it be diverted to child benefit initiatives?

http://home.eircom.net/content/irelandcom/topstories/1036751?view=Eircomnet

Fury over EU plans to tax children's clothes and shoes
From:ireland.com
Thursday, 17th July, 2003

The Department of Finance has reacted with fury to proposals from the European Commission that would oblige the Government to impose VAT on children's clothes and shoes, write Denis Staunton in Brussels and Mark Hennessy

The measure is part of a package aimed at "rationalising" reduced rates of VAT throughout the EU.

"This is a perfect illustration of why we feel as strongly as we do about tax harmonisation. It is absolutely central to where the treatment of tax matters is going," said a Department of Finance spokesman.

European Commissioner for the Internal Market Mr Frits Bolkestein said he was aware of sensitivity over the issue in Ireland and recalled that a Fine Gael-led government had fallen over the matter.

"I know this is likely to be criticised. I am sure it will be presented by some as a proposal to tax motherhood and apple pie," he said.

Ireland and Britain apply no VAT to children's clothes and shoes, Luxembourg applies a reduced rate of 3 per cent and all other EU countries apply standard rates between 15 and 25 per cent. Mr Bolkestein said studies showed the price of children's clothes and shoes in Britain and Ireland were above the EU average, even without VAT.

"The benefits of a zero rating accrues not to the clients, not to the public, not to the children, it accrues to either the producer or the retailer," he said.

"The VAT proposal is being dressed up as a simplification measure but its effect would be to remove certain goods from the current zero rate," the Department of Finance official said. "As far as we are concerned that amounts to a tax change. We are saying that this is precisely why all matters on tax must be dealt with by unanimity, including technical measures.

"We just will not have this. They are proposing this as no more than a simplification but the effect would be to change rates. That is precisely what we are concerned about," he said. However, the Government's position will be strongly threatened over the coming months in the upcoming inter-governmental conference.

The Commission claims that Britain and Ireland's zero rate of VAT could distort the single market by allowing businesses to enjoy higher profit margins than in other countries. Ireland's Commissioner, Mr David Byrne, spoke against the proposal at yesterday's Commission meeting. He was supported by Mr Neil Kinnock and Portuguese Commissioner Mr Antonio Vitorino but most Commissioners backed Mr Bolkestein's plan.

The Minister for Finance, Mr McCreevy, said on Monday that he will veto the proposal, which needs the support of all new Governments, unless the threat to impose VAT on children's clothes and shoes is lifted.

The Dublin MEP Mr Proinsias De Rossa rejected Mr Bolkestein's argument that the zero VAT rate represented a distortion of the single market and criticised the Government's failure to persuade the Commission not to include children's clothes and shoes in its proposal.

"The Internal Market Commissioner Frits Bolkestein is taking an ultra-liberal ideological stance on this issue with his claim that the zero VAT rate on children's clothes 'distorts' the internal market. I for one am not aware of influxes of continental parents travelling to Ireland to buy VAT-free children's clothes. Applying VAT to children's clothes and shoes would be a regressive move. It would place extra burdens on already hard-pressed parents and further increase inflation. I also have to query the effectiveness of the campaign waged by Charlie McCreevy on this issue in Brussels over recent months," he said.

The Commission's proposal would allow France to charge a reduced rate of VAT on restaurant bills but Mr Bolkestein rejected a call to allow lower VAT on CDs and DVDs.

mike65

I voted option 1. I never understood this nonsense about not taxing children clothing/shoes though I do understand the political reasons for runing away from the logic.

Remember 1982! etc....

Mike.

Victor

Methinks there is only one reason for the vociferousness in McCreevy's response - self protection.

Paddy20

I voted No. As the parents of children that I know are already finding the cost of raising a family extremely expensive, and to add VAT would have imho a negative effect overall, especially on the Children of the less well off citizens of this Country.

woolymammoth

Originally posted by mike65
Remember 1982! etc....

i was born in 1982...

anyone wanna fill me in on the details?

mike65

Ah youth! Them was crazy days in the early 80s, with 3 governments in the space of 20 months, one of which fell
when the new Minister for Finance John Bruton thought it a good idea or at least a necessary idea to tax all clothing and shoes. Labour who were in coalition with Fine Girl went balistic
as did the oppossition, independants, the media etc! When the budget was voted on it was defeated and an electrion was called.

ps this is the very edited version of events! I may have got a few bits slightly wrong as I'm just recalling events from the time, not googling!

Mike.

Imposter

The VAT proposal is being dressed up as a simplification measure but its effect would be to remove certain goods from the current zero rate," the Department of Finance official said. "As far as we are concerned that amounts to a tax change. We are saying that this is precisely why all matters on tax must be dealt with by unanimity, including technical measures.

Surely this is the most important bit here. VAT levels in every country differ. The only way to create a non-distorted market with regard to VAT on purchases is to have one system of VAT. And this is a tax change like it or not. Even a 1% difference in VAT distorts the market albeit by not as much so I realy can't understand the EU stance on this.

gandalf

Well there is no point increasing VAT on childrens clothing and footwear if the retailers and producers are profiteering as that article suggests.

This government needs to put into place a consumer price watchdog that has powers to sort out the blatant overcharging of services and goods in this country otherwise they are never going to sort out inflation and the competitiveness of the country.

If VAT is charged on Childrens Clothes & Footwear it will hit families already straining finances.

At the moment this government are like a ship at sea with no engine, they haven't a clue what they are doing.

Gandalf.

Victor

Originally posted by gandalf
Well there is no point increasing VAT on childrens clothing and footwear if the retailers and producers are profiteering as that article suggests.

But why should the woman in my example get VAT-free shoes, when someone with slightly bigger feet wouldn't?

mike65

Originally posted by Victor
But why should the woman in my example get VAT-free shoes, when someone with slightly bigger feet wouldn't?

Which was Garret Fitzgeralds argument back in '82 or was it '81?

Mike.

gandalf

Well Victor how many women are there with undersized feet not alot I'd wager. I'd prefer a few of those to get through to allow families clothe their children at a reduced cost wouldn't you ?

Gandalf.

dahamsta

Originally posted by gandalf
Well Victor how many women are there with undersized feet not alot I'd wager.

Two women in my family, both size 4. (I'm size 10, before you start casting aspersions. )

(I voted for the first option, although I'd be worried that McGreedy would try to divert it.)

adam

Victor

Originally posted by dahamsta
(I voted for the first option, although I'd be worried that McGreedy would try to divert it.)

I just remembered, he has somehting like 8 kids (twice married).

Originally posted by gandalf
If VAT is charged on Childrens Clothes & Footwear it will hit families already straining finances.

why don't they do something logical, like impose the full 21% rate, but give a rebate to families under a certain income?
That would comply with the proposed E.U directive would it not and be fair.
mm

Cork

Originally posted by Victor
I just remembered, he has somehting like 8 kids (twice married).

This is not really relevant.

The EU are known for looking at ridulous things like vat on toddlers clothes while ignoring price differentials across the EU.

It is about time thay began to look at price diffentials accross the EU and stopped looking at vat ofn Kids clothes. This is a metter of Irish fiscal policy.

gandalf

Originally posted by Man
why don't they do something logical, like impose the full 21% rate, but give a rebate to families under a certain income?
That would comply with the proposed E.U directive would it not and be fair.
mm

Actually Man I'd actually prefer it if this Government brought in anti-profiteering legislation to tackle all the over inflated prices we are seeing all over.

If VAT is brought back on Childrens clothes and a rebate system is initiated then it has to administered and that wastes tax payers money. It also would be an easier target for cutting down or removing for a future budget and without anti profiteering legislation the retailers will slap on the VAT on the existing inflated prices.

Gandalf.

Meh

Originally posted by gandalf
Actually Man I'd actually prefer it if this Government brought in anti-profiteering legislation to tackle all the over inflated prices we are seeing all over.

Wouldn't it be easier for them to just repeal all the pro-profiteering legislation (prohibition on below-cost selling, restrictions on supermarket sizes...)?

Cork

Originally posted by gandalf
Actually Man I'd actually prefer it if this Government brought in anti-profiteering legislation to tackle all the over inflated prices we are seeing all over.



Gandalf.

Price Controls in general do not work. It failed miserably with our pubs.

gandalf

Originally posted by Cork
Price Controls in general do not work. It failed miserably with our pubs.

Probably because this government are great at press releases but do nothing to enforce their ideas. Yes a few pubs have been censured but it hasn't really been done with any gusto now has it.

Tell me this Cork I've seen you on this board bitching about prices etc, what would your solution be ?

Gandalf.

Victor

Originally posted by Meh
Wouldn't it be easier for them to just repeal all the pro-profiteering legislation (prohibition on below-cost selling, restrictions on supermarket sizes...)?

Go read "No Logo", superstores only reduce prices in the short term, in the long term they increase price and reduce choice. Superstores are only there to help themselves, not the community, not inflation.

Meh

Originally posted by Victor
Go read "No Logo", superstores only reduce prices in the short term, in the long term they increase price and reduce choice

I have read it, and I wasn't convinced by Ms. Klein's argument here. She produced no economic evidence to back up this claim.

Superstores are only there to help themselves, not the community, not inflation.

And of course, small local shops are all owned by philanthropists who have no interest in making money.

Victor

Originally posted by Meh
And of course, small local shops are all owned by philanthropists who have no interest in making money.

Of course not, however they are kept in check by the bigger shops. The local mini-market is actually reasonable value (Kit-Kat 59c) compared to a lot of places, although on some individual lines they are more expensive than supermarkets.

Cork

The small shops do tend to be more expensive. People do vote with their feet & do their shopping in the multiples be that Dunnes, Testos or Super Valu.

The solution to high prices is to repeal the order on below cost selling & allow multiples to built what ever size shops they wish.

I would also deregulate pubs. I would open every sector in the economy up to competition. The EU needs to invetigate price differances across the EU. I can't understand why this is not being done.

The whole "No Logo" debate. People like their branded goods. That is their choice. The same principles apply to big coperations as the local cornor shop. These include to make a profit.

I knew a guy who was working in a small shop for 8 years - when the mimimum wage came in they let him go.