Mens sana

Jessica Valenti, a feminist blogger, argues in the Guardian that "feminine hygiene products should be free for all, all the time".  I respectfully disagree that the best way to help poor people get what they need is to subsidize supply of some goods to everyone, but that's not what I want to write about.

This is the bit that struck me:

Women in the UK are fighting to axe the 5% tax on tampons (it used to be taxed at 17.5%!), which are considered “luxuries” while men’s razors, for some baffling reason, are not.

It seems to imply that men's razors are VAT-free, which is simply not the case - they carry VAT at 20%.  There are three VAT rates in the UK, the standard rate of 20%, the reduced rate of 5%, and the 0% rate. And some items are VAT-exempt, which is not quite the same thing as being zero-rated.  HMRC has a list of goods and services in the non-standard categories: the list mentions sanitary protection but not razors, which therefore are taxed at the standard rate.

EU VAT policy is discussed quite readably in this UK parliamentary document.  In summary, the reduced rate of VAT applies only to items selected by the UK from an EU-specified menu, and the zero rate applies only to items which the UK zero-rated before the 1991 VAT harmonization - including food, books and newspapers, children's clothes and shoes, public transport, and drugs and medicines on prescription.  The European Commission would like to abolish zero rating, and likes to see its continuation, principally in the UK and Ireland, as a temporary measure.

The much less readable EU documentation is mainly in the 2006 VAT directive : Annex III has the list of items eligible for reduced-rate VAT, and includes "protects used for sanitary protection", but has nothing about shaving.  Title IX of the same document specifies what goods and services should be exempt from VAT.  Chapter 4 of the document, containing "Special provisions applying until the adoption of definitive arrangements", contains Article 110 "Member States which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage ... may continue to grant those exemptions" ("exemption with deductibility" means a 0% rate).

So where has Valenti, who, to be fair, is not European, got the idea that men's razors are zero rated?  Searching the internet suggests that it's something that UK feminists just know, perhaps because they've read it on the internet, mostly in comments on online forums. This website thunders "We’ve discovered that men’s razors do not carry any VAT at all.  Lowered to 0% in 2001, they became exempt from any VAT."  How can one discover something which is not just untrue, but legally impossible?  This ePetition simply notes that "men's razors are tax free".  This article ("men’s razors are not subject to tax") announces another online petition, these two articles link to the petition ("the list includes men's razors"), but the petition itself, while having fun with the zero-rated status of crocodile meat (which is zero-rated because it's a food), doesn't mention razors at all.  It seems that the authors of the petition discovered their mistake, and quietly deleted it.

Nowadays it's quick and easy to check facts online - anyone who, like me, has in the distant past spent hours in libraries searching for some minor piece of information marvels at what one can discover.  And yet the internet seems to be used much more to spread misinformation than to get things right.

Meanwhile, shouting at George Osborne about this is pointless: he doesn't have the power to change EU VAT law - that would require the agreement of all the EU governments.  And most of the EU governments would like to abolish zero-rating altogether.

Minimum Unit Price

A study by researchers at the University of Southampton has come up with the dramatic result that the median heavy drinker is paying 33p a unit for alcoholic drinks, whereas the median low-risk drinker is paying £1.10, so that almost all the effect of a Minimum Unit Price of say 50p would fall on the heavy drinkers.  That's encouraging for proponents of minimum pricing, but it doesn't address the question of whether heavy drinkers would respond to a price increase by cutting down how much they drink or by saving money on less important things such as food, clothes and lodging.

I ask myself what they're actually drinking for 33p a unit or less.  Since I last wrote about this, the government has abandoned its plans for a minimum alcohol price (in England and Wales), but banned via the licensing laws the sale of alcoholic drinks below the level of duty+VAT.

Duty on alcoholic drinks is not simple.  EU rules insist that whereas duty on beer and spirits should be proportional to alcohol content (or degrees plato), duty on wine and cider should be proportional to the volume of drink (with provision for different levels of duty for various bands of alcohol levels, and for sparkling drinks).  I don't know why this inconsistency has arisen, but I guess it's because they did what the Germans wanted for beer and what the French wanted for wine.

Following these rules, the UK's current levels of duty per unit of alcohol are:
- beer up to 7.5% ABV:    18.74 p
- spirits:                             28.22 p
- cider 7.5% ABV:              5.288 p
- cider 8.5% ABV:              7 p      
- wine 15% ABV:              18.22 p
- fortified wine 22% ABV:  16.56 p

For cider and wine, the duty per unit is higher if the strength is lower than what I've specified, because the duty is charged per volume of drink not per volume of alcohol.

Adding in VAT at 20% gives the minimum permitted price per unit.  I've compared these prices with the cheapest I could find in a few minutes' searching the internet:

	Lager	7.5 cider	13% wine	Whisky	Vodka
Duty+VAT per unit	£0.225	£0.064	£0.252	£0.339	£0.339
Cheapest price per unit	£0.325	£0.20	£0.307	£0.375	£0.381
Margin	£0.10	£0.136	£0.054	£0.036	£0.042

It's remarkable how cheaply it's possibly to make alcoholic drinks and bring them to market, so long as you spend no money on advertizing (the cheap drinks are all brands I'd never heard of), take the cheapest legal options in making them, and use the lowest cost retailers (Aldi, Iceland...).  Cider seems to be the most expensive of these cheap drinks to make - the regulations (since 2010) require at least 35% apple juice, and apple juice - even if it's imported pomace from eastern europe - is not very cheap.  However the duty on cider is so low that it's still easily the cheapest way to buy alcohol to drink.

If the government wants to make very cheap drink more expensive, I have a simple suggestion for it: increase the minimum apple juice content of cider.  Comparing the margins, I guess that at about 80% apple juice content cheap cider would cost as much as cheap lager (the experts can work out the exact level to achieve this).  Manufacturers would then have a choice of making cider in the way television adverts imply it's made - out of apples - and getting the low rate of duty which, I suppose, was intended to support that traditional process, or making it, as they mostly do now, with less apple and plenty of added sugar, and have it taxed as "made wine" - at wine rates.

Incidentally, the Scottish parliament passed a law imposing a minimum price of 50p a unit in May 2012.  Following legal challenges by the Scotch Whisky Association the law has been referred to the EU Court of Justice, so it's still not been implemented, and isn't likely to be in the next year or so.