The UK has four different tiers of VAT classification:

• Standard rate (20%)

• Reduced rate (5%)

• Zero-rate (0%)

• VAT exempt

The UK government of 1975 entered into negotiation process to determine essential items to be zero-rated, such as food meaning VAT is charged, but at a rate of 0%. A zero-rated item can be altered to the reduced or standard rate, but once applied cannot return to the 0% rate.

This differentiates a zero-rated item from a VAT exempt item in which no VAT is charged at all. In addition if an item was not included in the original negotiation it cannot be made zero-rated.

Schedule 8 of the Value Added Tax Act (1994) contains a list of zero-rated goods and services, with Schedule 9 containing VAT exempt goods and services. Sanitary products do not appear in either of these schedules. So the reason we're here today is our own failure at negotiation in the 70s, and our failure to win friends within the EU at the most recent vote on the topic.

The essential legal instrument governing VAT application across the EU includes a minimum standard rate of 15%. The Directive contains three provisions relevant to the imposition of VAT on sanitary products. Article 98 states that Member States may apply a discretionary reduced rate to goods and services including sanitary products within Annex III. Article 99 provides the reduced rates may not be less than 5%. The UK’s zero-rated items status is preserved by Article 110. Sanitary products were charged at the standard rate in the UK until the 2000 Budget at which point the VAT rate on sanitary products was reduced to 5%.

So the EU isn't setting the rate specifically just the framework within which it can be applied; for example Hungary charges 27% VAT on sanitary products and we charge 5%.