Report finds the abolition of “tampon tax” benefited retailers, not women

11 November 2022| CATEGORIES: VAT, VAT reduction| TAGS: tampon tax, VAT rate cut

A report by the Tax Policy Associates think-tank has found that following the abolition of 5% VAT on women’s sanitary products only a 1% price reduction was passed on to consumers.

Background

The 5% rate of VAT that applied to women’s sanitary products in the UK was abolished in January 2021 following Brexit.  While it was a Member State of the EU, the UK was unable to apply any rate of VAT lower than a reduced rate of 5% to sanitary products. Once the transition period ended on 31 December 2020 the UK was no longer bound by the EU VAT Directive.

Report findings

Office for National Statistics (ONS) data was used to analyse tampon price changes around 1 January 2021, the date that the so-called “tampon tax” was abolished. This was possible because the ONS includes tampons (but not other menstrual products) in the prices it samples every month to compile the consumer prices index.

The report found that consumers did not get the full benefit of the abolition of the 5% VAT “tampon tax”. At most, tampon prices were cut by around 1%, with the remaining 80% of the benefit retained by retailers.

The report concludes that “the public and policymakers should be sceptical of those making proposals for cuts in VAT and duties, particularly if claims are made that this will benefit consumers, and/or those on low incomes.”

It is suggested that a better way to help those who can’t afford to pay “is to put cash directly in their hands (through the tax and benefits system), or in some cases provide free or subsidised products.”

The evidence in this case shows that lowering the tax rate in the hope that retailers would pass the savings on to consumers didn’t work