Royal Mail to lose VAT advantage
VAT could soon be charged on postage stamps and other postal services provided by the Royal Mail following a European Commission ruling on Tuesday.
The ruling is designed to end unfair competition between public sector bodies such as the post office, which is VAT-exempt, and private operators who are forced to pay VAT.
EU tax commissioner Fritz Bolkenstein claimed the ruling would make the VAT system fairer and said the cost would not have a significant effect on consumers.
However in anticipation of a consumer backlash, governments have the option to apply a reduced VAT rate on ‘standard postal services’ – addressed items weighing less than 2kgs.