VAT the health stealth tax

Proposed VAT Increase on Vitamins, Minerals and Fish Oil Supplements
VAT health foods supplements vitamins

The Tax Collector – Marinus van Reymerswale

Tom was shrewd. He wanted to use his motorbike at college but no student had done this before. Cars were forbidden so it seemed motorbikes would be too. Tom knew if he asked the authorities if he was permitted to use his motorbike they would refuse, so he didn’t ask; he used it regardless. Tom had learnt that if you ask a question of an authority, it will have to answer that question and it will likely be an answer you don’t want, an answer that suits them not you.

Clarifying VAT Rate

The Irish health food industry was wasn’t so shrewd, albeit honest and dutiful. They sought clarification from the Revenue on the tax exemption of certain food supplements. After a lengthy process, Revenue recommended applying 23 per cent VAT across the board, on all supplements. Some supplements had been subject to VAT, such as sport supplements and supplements for a specific purpose, like hair vitamins.

Zero rate VAT has been in place since first introduced in 1972, into a much smaller market. The new rate is to be applied from 1March 2019.

Of course the health food industry has raised concerns about such a dramatic increase, after all, health food supplements are hardly a luxury but a means of one taking responsibility for their health. Pharmacists have said it will hit those on a lower income and the elderly particularly. Pharmacies may fare better since drug companies can afford product licenses which will render the supplement tax exempt, whereas the same product not having a product license in a health shop will be subject to a 23 per cent hike.

Health Stores Ireland believes the new rate goes against the government’s policy that established support bodies like Healthy Ireland. Tommy English of Retail Excellence emailed the Minister for Finance, Paschal Donohue, stating this new policy was likely to direct business to cheaper overseas alternatives online. The Minister did not acknowledge the email though a spokeswoman claimed the Minister would examine some of the policy choices around the VAT of supplements. However, the Sunday Independent quoted the Minister on Sunday 27 January as saying: “My hands are tied.”

Legislating

But are his hands tied? Is a sitting Minister that impotent? Not so according to his predecessor, Michael Noonan. Noonan was Minister for Finance in 2014 when a 23 per cent VAT was to be imposed on herbal teas from zero. The thinking behind Revenue’s decision was that herbal teas were different to ordinary tea – but isn’t ordinary tea herbal? you might ask. Yes, of course. Revenue’s decision, again, resulted from an innocent question asked of the relevant authority by a solicitor on behalf of a tea distributor.

The new tax was mooted despite a zero rate just north of the border. “Again, people are being penalised for taking the healthy option”, said one supplier.

In September 2014, Minister Noonan declared there would be no VAT introduced. He said, he “would change the country’s tax laws…”

The Irish Association of Health Stores had already told their members the previous June that VAT would not be applied; “due to industry lobbying.” The industry lobbying refers to the influence of the late and respected Peter Barry, TD, a Fine Gael politician like Mr Noonan. Mr Barry’s family own the Barry’s Tea company in Cork.

Unlike Minister Donohue, Minister Noonan’s hands weren’t tied, so perhaps it’s more a case of this Fine Gael government not having the political will to save an industry of small business owners who contribute over €60million annually to the Irish economy. Unlike the banks, it’s an industry that is not “too big to fail.”

Truth is, the government can legislate to modify or maintain the current rate of VAT. We have a government headed up by a doctor (since June 2017), Leo Varakar, who has just claimed food supplements are “snake oil,” to which muinteoir Micheál  Martin, the leader of the main opposition party, blurted: “Does that mean cider vinegar doesn’t work?” Most profound! An hour later, having thought the better of it, Varadkar apologised.

Isn’t it bizarre that Varadkar forgot his colleagues recommend a plethora of supplements for health reasons? The Taoiseach is, however, rather gaff prone.

Some of his many impulsive gaffs include an empty promise to “reward those who get up early in the morning”, meaning workers. Since then (May 2017), workers were rewarded with €1 per week extra in the 2018 budget; the unemployed on jobseekers benefit received €20 and all others on welfare a guaranteed annual rise of €5. The story was worse for the worker in the 2019 budget, receiving nothing extra according to at least one analyst.

Another of Varadkar’s insensitive promises – along with Health Minister Harris – that amounted to another apology was that no woman affected by the CervicalCheck scandal would face court. He then clarified that promise with: “I should have been more clear (sic) that it was not guaranteed that no woman would face court.” Clear? Hardly; it’s not “more clear”, it’s a contradiction.

Despite our huge crisis in housing, Varadkar is lucky the media are on his side and don’t take him to task on another promise. His biggest gaff was the promise he made in his Christmas 2017 speech in which he stated: “We will house 100 families each day in 2018.” Did he? No, far from it, according to the Peter McVerry Trust.

The Trust website informs us that from November 2017 to November 2018, the number of homeless men increased by 13 per cent. Overall, from December 2014 to May 2018 – during Fine Gael’s tutelage of the State – the number of homeless increased by a whopping 6,988. In November 2018, the number of adults in emergency accommodation had increased by 130 on October, just one month earlier. The monthly homeless increased from 5,524 in November 2017 to 6,157 in November 2018. This is despite the Department of Housing, Planning and Local Government, in spring 2018, redefining the categorisation of certain homeless households, which removed 1,606 from the monthly homeless reports!

Critics of the proposed new tax are correct; the extra cost will be very taxing for most people. Politicians are cushioned from increases in the cost of living; I could live like a king and run an office on a T.D.’s unvouched expenses. With a review of the household property tax due this year and a carbon tax looming as well as a possible general election, it might cost the Fine Gael government and their compliant buddies, Fianna Fail, a lot more than 23 per cent is worth.

You might well wonder, along with Professor Gerard Casey who asks in his book Libertarian Anarchy, whether taxes are legitimate and if we actually need a government.

In the meantime, you can enjoy a Big Mac at 13 per cent VAT and a bag of sugar at 0 per cent.

Image: Wikimedia

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