Commission backs VAT on all clothes

The European Commission put forward proposals to charge VAT on children's clothes and shoes yesterday despite threats from three countries, including Britain, to veto them.

Frits Bolkestein, the commissioner for tax and the internal market, pressed ahead with the plans although he acknowledged that they might be "shipwrecked" when member states discuss them.

Britain and Ireland impose no VAT and Luxembourg has a rate of only 3 per cent. The British Government has a manifesto commitment to keep the system and the issue is highly sensitive in Ireland where the government fell in 1982 over a similar proposal.

Mr Bolkestein's proposal is part of a broader attempt to rationalise VAT rates across the EU, where differences are widespread. He argued that children's clothes and shoes in Britain were more expensive than the EU average, despite the fact that most other nations applied VAT, and that retailers were pocketing the difference. But he said he could not guarantee that prices would not rise if VAT was imposed.