Where is the “value” in value-added tax?

Photo by Eunice Lui on Pexels.com

As an accountant, I tend to automatically equate value to economic value. When teaching management accounting of course, I know there is more than just financial/economic value. Such “other” values are probably much more important to us and our planet – time is precious as the photo of this post captures.

I was intrigued recently to read how a “tampon tax” was abolished in the UK from January 1st 2021. The tax, value-added tax (VAT) of 5%, no longer applies to sanitary products such as tampons. As I read around the topic (and I know the issue of free sanitary products is a hot topic), I found that Ireland never charged VAT on such products. From my days of studying taxation, I recall that a basic principle of VAT in Ireland was that basic needs (e.g. bread, medicines) were outside VAT scope, but “luxury items” were subject to VAT (e.g. sweet cakes – in contrast to plain white bread).

The above made me think of what value should we be considering in VAT and is there value other than economic value. Allowing women to have cheaper or tax free sanitary products is something which I think adds value to society. Or take another example, back in 2012 a baker in Saxony, Germany was held liable to pay VAT on unsold bread donated to homeless people (I think this debate may still be rumbling in Germany). This baker was certainly adding value to society by helping others less fortunate, and again it is questionable should such an activity be taxed.

I am sure there are more examples like these two. Of course, governments around the world are introducing taxes to help protect our environment etc, but I do wonder should legislators consider the existing and well embedded taxes too. Some simple changes as to what constitutes “value” might be worthwhile to improve society.

About martinjquinn

I am an accounting academic, accountant and author based near Dublin, Ireland.

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