EFPIA opposes EU plan to raise sales tax on pharmaceutical products

The European Federation of Pharmaceutical Industries and Associations has published its strong opposition to "any recommendation aimed at deleting pharmaceutical products from the list of categories of goods and services eligible for a reduced [value added tax] rate." The European drug industry group was responding to a consultation exercise by the European Commission which included a proposal to remove prescription drugs from the list of products that are exempt from paying the top rates of VAT.

The EFPIA said it had focussed on question 16 of the EC's on-line consultation document, which asks: "would you recommend adding or deleting any other item to or from the list of goods and services eligible for a VAT reduced rate under EU VAT legislation? Why?" Under Directive 2006/112/EC the basic VAT rules require EU member states to apply a standard VAT rate of at least 15% and two optional reduced rates of minimum 5% to a limited list of goods and services. The EFPIA noted that only four of the 27 EU countries do not provide a reduced VAT level for drugs: Austria, Bulgaria, Denmark and Germany.

According to the EFPIA's response, "the consultation document fails to provide any criteria and underpinning rationale for including pharmaceutical products in the list of possible deletions of items from the scope of reduced rates." The drug industry group pointed out that an economic study on the effects of reduced VAT in EU countries argued that there are real and valid economic arguments for extending lower VAT rates to more sectors, quite the reverse from deleting drugs from the lower rate.