EU chiefs absorbed in nappy tax debate
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The conflict has already taxed some of the European Commission’s finest legal minds, required hundreds of hours of internal negotiations and exposed a rare split in the otherwise harmonious 25-strong executive body of the EU.
The issue at stake, however, is neither grand economic policy nor a tricky foreign affairs dilemma, but a bizarre controversy over diapers.
László Kovács, the European Union’s tax commissioner, has for months been waiting for his colleagues’ clearance to launch a legal challenge against five European countries that he says are applying the wrong rate of value added tax on diapers – babies’ nappies.
Mr Kovács and his advisers argue that nappies are not included on the list of goods that are exempt from the EU’s minimum rate of VAT, which is currently 15 per cent.
They believe that the countries – the Czech Republic, Portugal, Poland. Hungary and Malta – are in breach of EU law and it is therefore the Commission’s duty to launch an infringement case against their governments.
Launching such cases – thousands of which come up every year – is normally seen as a routine matter.
But unfortunately for Mr Kovács, he is facing a powerful alliance led by Vladimir Spidla, the EU social affairs commissioner, that is bent on thwarting his ambition. According to several officials, Mr Spidla, who hails from the Czech Republic, has secured the support of no fewer than three Commission vice presidents – Germany’s Günter Verheugen, Jacques Barrot from France and Sweden’s Margot Wallström – and at least three other commissioners.
Faced with such a growing chorus of dissent, Mr Kovács took the nappies item off the agenda of last week’s Commission meeting at the last minute.
His spokeswoman says he wants to consult his fellow commissioners before proceeding any further.
Mr Kovács’ opponents argue that any move that would result in higher taxes on babies’ nappies would send the wrong signal to young Europeans, who are already proving worryingly reluctant to have babies. They also point out that some countries, such as Britain, apply no VAT on babies’ nappies at all because of grandfathering rights negotiated during their entry into the EU.
“It is absurd to impose a burden on families, especially since diapers for old people benefit from reduced VAT rates,” one official close to Mr Spidla said.
The dispute is the latest in a series of disputes in the European Union over VAT and follows earlier stand-offs over such crunch issues as restaurant bills, where France was pressing for a lower rate.
But Mr Kovács insists that he has the law on his side. The Commission’s powerful legal service opined last week that babies’ nappies did not fall under the definition of “medical products”, as described in an annex to a European tax law.
But with political sensitivities mounting, it is far from clear whether the lawyers will have the final word. In the meantime, the nappies battle rages on.
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