Zero VAT on children’s shoes not passed on

PARENTS are being ripped off by shops and manufacturers who are charging more for children’s shoes despite a zero VAT rate.

The European Commission wants the Government to introduce VAT on children's clothing and footwear and says they can return the money to needy families.

But Finance Minister Charlie McCreevy has pledged to fight any attempt to put 21% VAT on children's wear. The issue brought down John Bruton's Fine Gael government in 1982 and no government has dared to approach the issue since. But the figures show that even women's shoes are cheaper in Ireland than footwear for infants and children, even though the full VAT rate applies to adults shoes.

Given an EU average for shoes of 100, the cost for children's shoes in Ireland is 92, while it is 91 for women's and 93 for men's.

Four other EU countries sell their children's footwear cheaper than Ireland Portugal, 67 even with 17% VAT; Spain, 77 with 16% VAT; Italy, 81 with 20% VAT and Greece, 85 with 18% VAT.

Ireland is cheapest for clothing including children's, but the difference between women's and infants' clothing is small despite VAT on adult clothing.

Imposing VAT is part of a widespread attempt by the commission to ensure that every country charges similar rates of indirect tax.

Commissioner Frits Bolkestein, responsible for taxation and the single market, said that the zero VAT rates were not reflected in the price being charged for children's wear.

"The only people to benefit from the zero rate of VAT are the manufacturers and retailers. It is not being passed on to the parents and children," he said. In effect, this meant the retailers and manufacturers are pocketing the VAT money.

"If the governments charged VAT they would get increased revenue and they are perfectly free to return it in a targeted way to poor people," he said.

Mr Bolkestein said he was fully aware that this was a political problem for Ireland.

"I know this proposal is likely to be criticised and presented by some as a proposal to tax motherhood and apple pie which we know are both sacrosanct.

But the reality is that it is not parents and children that are benefiting from zero VAT," he said.

He also pointed out that all the new member states have had to agree to have a standard rate of VAT on children's clothing and footwear and it was unfair that they have to do so while current member states do not.

The proposal was objected to strenuously at yesterday's commission meeting by Commissioner for Consumer affairs David Byrne as well as by former British Labour Party leader Commissioner Neil Kinnock.