VAT on education made simple

Although we rarely get inclement weather these days, storms in a tea cup are not that hard to come by. The one created over the VAT on education issue can be classified as one of them. The issue may have been portrayed as being complicated. In reality, it is quite simple.

This issue cropped up in the aftermath of a Bondiplus programme earlier this year when Alfred Sant said he would remove VAT on education. The Prime Minister promptly pointed out that there is no VAT on education. In pure, Alfred Sant style, the Opposition Leader went on at a tangent speaking about VAT on books, uniforms and stationery. Since then, the Labour media have had a hard time trying to convince the public that their leader knows what he is saying.

The spin on this issue was to confuse education with items related to education, and there you have it. The man in the street starts feeling cheated that he pays VAT on anything related to education.

Now let us try to entangle the issue without confusing people.

First of all nobody enjoys paying tax, so it is quite obvious that whenever you ask someone about paying this or that tax he will tend to prefer paying less tax. Of course, when one needs services that are paid from the public purse that's a different issue.

Secondly, what does the Maltese law say about VAT on education? The law is clear. No VAT is charged on education provision. But what is education for VAT purposes? This includes:

• The provision of education or educational research, including distance learning, by a government school or institution, by the University of Malta, by a school or institution registered under the Education Act, or by any educational establishment recognised as such by the VAT Commissioner.

• The provision of education or educational research, including distance learning, of a kind provided by a school or university, or of religious instruction, by a non-profit-making institution recognised as such by the VAT Commissioner.

• Tuition given privately by teachers acting in an independent capacity in subjects which are normally taught in the course of education provided by a school or university but excluding tuition in recreational, physical or sporting activities or disciplines.

Thirdly, as members of the EU we must also abide by the regulations governing this sector. It is common knowledge, and this was recently confirmed on another newspaper by a spokesman for the European Commission, that it is not possible to remove or "revise" VAT rates on items such as uniforms or stationery. The only concession we are allowed is the reduced rate on books which currently stands at the minimum rate of five per cent.

To make things even clearer, let us compare education with health, water and food. On these three items there is no VAT. However, if you need a bandage you must pay VAT on that bandage.

Water carries no VAT but you must pay VAT on the tap which it comes out from. Food is VAT-exempt but we must still pay tax on forks and knives. Will Labour tell us that there is VAT on health, water and food?

So the bottom line is that there is no VAT on education.

So what are Labour proposing? Are they going to remove VAT on all uniforms, stationery, desks, computers, school bags and anything else that might be directly or indirectly related to education? No, they cannot.

So there are three possibilities: a) that they have no idea how they are going to do this and we will have a second take of the CET comedy; b) that this is just a pre-electoral spin intended to save face and offer the impossible; c) that Dr Sant intends taking Malta out of the EU or try to fiddle about with things in an attempt to dupe the EU.

It is quite obvious that the opposition is still not sure about VAT and the EU and the only reason why it made a U-turn about them is to score points with the electorate. However, I am no longer convinced it will not revisit both issues if and when it regains power.

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