Issue over nappies' VAT rate ironed out

In a classic example of Brussels bureaucracy, the European Commission yesterday warned Malta over the sale of baby nappies at a reduced VAT rate adding, however, that it will be settling the issue as a sign of its "social commitment".

The Commission officially initiated legal proceedings against Malta and four other member states yesterday through a letter of formal notice about their application for a reduced VAT rate on child nappies. The Commission said the practice went against one of its VAT directives.

But in what is being described by diplomats as a face saver to an embarrassing situation, the Commission declared it fully supports social and family-friendly policies and thus will be creating a legal basis for the application of reduced VAT rates for such nappies.

The Commission has given Malta, the Czech Republic, Hungary, Poland and Portugal two months to respond to its claims. The member states' response will be taken into account in a report on the application of reduced VAT rates the Commission will present to the EU finance ministers next year. On the basis of that report, the Commission will draft a proposal to amend its directive.

Sources close to the Commission told The Times that while it is true that according to the letter of the law member states had no right to sell nappies at a reduced VAT rate, the issue was likely to expose the Commission to ridicule.