Rash of dissent over nappy taxes

EU tax commissioner Laszlo Kovacs was thwarted last week in his latest attempt to take five EU countries including Malta to court for applying the wrong rate of VAT on nappies.

The Financial Times reported yesterday that Mr Kovacs has for months been waiting for his colleagues' clearance to launch a legal challenge against the Czech Republic, Portugal, Poland, Hungary and Malta, arguing that nappies are not included on the list of goods that are exempt from the EU's minimum rate of VAT, which is 15 per cent.

Mr Kovacs has, however, run into a powerful alliance of opponents led by Vladimir Spidla, the EU social affairs commissioner and including commission vice-presidents Gunther Verheugen, Jacques Barrot and Margot Wallstrom.

Faced with the chorus of dissent, Mr Kovacs took the nappies item off the agenda of last week's Commission meeting at the last minute.

His opponents argue that any move that would result in higher taxes on nappies would send the wrong signal to young Europeans who are increasingly reluctant to have babies.

They also point out that some countries such as Britain apply no VAT on nappies because of rights negotiated during their EU entry.

Diapers for old people benefit from reduced VAT.

Mr Kovacs insists the law is on his side. The Commission's legal service said last week that nappies did not fall under the definition of "medical products " in European tax law.