Taxware, the tax calculation and compliance application arm of First Data Corporation, has prepared a list of some of the more amusing indirect tax idiocies dreamt up by tax authorities around the world last year.
In Morocco, the operation of Turkish-style baths and public showers are exempt from VAT but if you want to emerge clean as well as relaxed, tax of 7% must be paid on all soap used.
In Portugal, the selection of pasta can prove to be taxing as Spaghetti and Penne incur only a 5% VAT rate, whereas if you choose Ravioli, Cannelloni or Tortellini, you will be slapped with a 19% VAT rate.
In San Marino, alternative medicine is catching on with the general public but this is not reflected in the country’s VAT policy. While traditional drugs carry a small 2% VAT rate, alternative medical treatments, such as homeopathy for instance, may incur 17% VAT.
UK residents are exempt from paying VAT on food but not when that food has hallucinogenic properties. According to HM Customs and Excise, the sale of ‘magic mushrooms’ is subject to the standard VAT rate of 17.5%.
Still on the subject of food in the UK, hot ‘prepared’ food is taxable, but zero-rated if the food is cold when it reaches the customer. Toasted sandwiches are zero-rated because the purpose of toasting relates to flavour and texture and not to the necessity of the food being hot when consumed.
“Never let it be said that tax legislators haven’t a sense of humour”, says Jon Abolins, senior vice president of Operations for Taxware. “The inventiveness that lies behind these nuances of interpretation and application of VAT regulations deserves to be recognised and celebrated. Living with these rules, however, causes considerable additional expense for companies that have to ensure their compliance worldwide. The appeal of VAT for tax authorities lies in its flexibility. For corporate organisations required to monitor, understand and apply the minutiae of tax regulations, the reality can be very burdensome.”
“Hence,” he adds, “the rise in interest in Taxware’s innovative tax compliance solutions.”