Price Premiums Cancel Out Tax Cut in Germany on Feminine Hygiene Products

However, at almost the same time, companies offering tampons and pads have significantly increased the prices for panty liners. The latter were exempt from the VAT reduction. “Away from the public eye, companies have profited from a political measure that should have relieved the burden on female consumers,” says Zamorski. The reduced VAT has thus only seemingly led to financial relief for women and greater fairness. Around a third of women who regularly buy pads and tampons also use panty liners, which means they have lost at least part of the tax break as a result. “Women who mainly buy panty liners were even burdened by the VAT reform,” says Florian Neumeier at the ifo Institute, co-author of the study.

This situation illustrates how important it is in tax policy to consider the interactions between different products and markets. “Tax measures must take account of both the direct effects on the target products and the indirect effects on related goods,” says Neumeier. That is the only way to avoid unintended consequences and market distortions.