EU Commissioners want to impose VAT on British postal services

The price of sending a first-class letter is set to rocket because European bureaucrats want to impose VAT on British postal services.

EU Commissioners in Brussels are proposing the tax – which could add 17.5 per cent to the postage cost of all letters and parcels – because they want member states to have the same policies on postal services.

But the idea has already drawn outrage from Royal Mail and consumer groups.

A spokesperson for Royal Mail said: ‘The last thing we would want any of our customers to face is an increase in their postage due to VAT. Many could recover it but a great many more would not be able to. The hardest hit would be individual consumers, small business and charities, many of whom rely on mail for fundraising.’ And Andy Frewin of the consumer body Postwatch, added: ‘We think the Government should push for zero tax rating for everyone.’

However, the Government last night appeared to be unsure about how it would respond to the proposals.

In a statement, the Treasury insisted: ‘The line from Ministers is that they won’t agree to VAT on stamps.’ But a spokesman later conceded that nothing was set in stone, claiming: ‘If it’s an EU initiative, we won’t have developed our policy on it until we’ve seen the proposal.’ Britain has already announced a 1p rise in the price of stamps from next month, making first-class stamps 28p and second-class 20p.

If the EU proposal gets the go-ahead it will mean the cost of sending a first-class letter will increase by five pence to 33p within two years.

Each EU member has the right to veto the idea but if everyone agrees, it will become European law.

Brussels officials say that the proposal is likely to give member states the option of imposing a tax of 5-10 per cent on smaller items or the freedom to charge VAT at the full local rates across the board – which is 17.5 per cent in the UK.

Royal Mail’s monopoly on delivering post is currently being broken up, with the anomaly that rival operators are to be charged VAT while the Royal Mail is not.

However, Jonathan Todd, the European Commission’s spokesman on taxation, argued that the changes would not necessarily mean higher postal charges, because Royal Mail could claim back VAT on its own outgoings for the first time and pass the savings on to customers.

The EU proposal is the idea of European Commissioner Frits Bolkestein, former leader of the Dutch Liberal Party, who has been pressing for the tax changes for several years.

Sweden imposed VAT on postage after its postal system was opened to competition in 1993. Since then, the price of the country’s first-class services has risen by more than 72 per cent, according to Royal Mail figures.