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Who exempts what from consumption taxes?



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Who exempts what from consumption taxes? Posted 19/01/2015 by Leslie Nielson

At the time the Goods and Services Tax was introduced, health, education and financial

services and some food items (mainly fresh food), amongst other areas, were exempted

from its reach. Recently, several Coalition members and senators, as well as some

economists, have called for the GST to be extended to some of these areas.

As at 1 January 2014, 164 countries had implemented a consumption tax (often known as a

value added tax (VAT)). Within the Organisation for Economic Cooperation and

Development (OECD), 33 of the 34 members had such a tax, the notable exception being

the United States of America.

According to the OECD, all member states applying a consumption tax exempt certain

economic activities from their consumption tax. That said, the OECD has identified New

Zealand and Turkey as exempting the least amount of economic activity from their

respective arrangements. All other OECD countries either exempt parts of their economy

from their consumption tax or apply a reduced rate to some economic areas.

The most common exemptions amongst the OECD members are : postal services; transport

of sick/injured persons; hospital and medical care; human blood, tissues and organs; dental

care; charitable work; education; non-commercial activities of non-profit making

organisations; sporting services; cultural services (except radio and television broadcasting);

insurance and reinsurance; letting of immovable property; financial services; betting,

lotteries and gambling; supply of land and buildings; certain fund-raising events.

The following table shows which OECD countries include or exclude food, health, education

and financial services from their respective consumption taxes, along with various countries’

general consumption tax rate:

Table 1: OECD countries that exempt Food, Health and Education from their Consumption

Tax Country Food Y/N Education

Y/N

Health Y/N Financial Services Y/N

General Rate %

Australia Y Y Y Y 10

Austria N (reduced rate) Y Y Y 20

Belgium N (reduced rate) Y Y Y 21

Canada Y Y Y Y 5*

Chile N N N Y (some) 19

Czech Republic N (reduced rate) Y Y Y 21

Denmark N Y Y Y 25

Estonia N Y Y Y 20

Finland N (reduced rate) Y Y Y 24

France N (reduced rate) Y Y Y 19.6

Germany N (reduced rate) Y Y Y 19

Greece N Y y Y 23

Hungary N Y Y Y 27

Iceland N (reduced rate) Y Y Y 25.5

Ireland N Y Y Y 23

Italy N (reduced rate) Y Y Y 21

Japan N Y Y Y 8 (increasing to 10)

Korea Y Y Y Y 10

Luxembourg N (reduced rates) Y Y Y 15

Mexico N Y Y Y 16

Netherlands Y Y Y Y 21

New Zealand N N N Y 15

Norway N (reduced rate) Y Y Y 25

Poland N (reduced rate) Y Y Y 23

Portugal N (reduced rate) Y Y Y 22

Slovak Republic N Y Y Y 20

Slovenia N (reduced rate) Y Y Y 22

Spain N (reduced rates) Y Y Y 21

Sweden N (reduced rate) Y Y Y 25

Switzerland N (reduced rate) Y Y Y 8

Turkey N (reduced rate) N N Y (some) 18

United Kingdom Y Y Y Y 20

Sources: KMPG Global Tax Practice VAT information sheets & OECD

* Additional Provincial HST rates raise overall rates to above 10% for most parts of Canada

In the above table a ‘Y’ against a category indicates that it is exempt from that country’s

consumption tax. A ‘N (reduced rate)’ indicates that the category is not exempt, but that a

reduced tax rate applies. Lastly, a ‘Y (some)’ entry indicates that some parts of this category

are exempt from that country’s arrangements.

Care should be taken in directly comparing exemptions and inclusions in this table. No two

countries are alike in what they exempt or include. Further, not all items in each category

will be included or excluded. For example, for Australia food is listed as excluded but not all

food is excluded from the GST. Accordingly, this table is a general guide only.

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