In order to make progress on the European Commission’s 2018 proposal to give Member States the freedom to set reduced, super-reduced and zero VAT rates (see EUROPE 11940/15), the Portuguese Presidency of the Council of the EU is seeking political guidance from EU Finance Ministers on several issues, on 18 June, at the Ecofin Council.
Discussions so far have shown that Member States want a positive list of products and services eligible for reduced rates, whereas the Commission had proposed a negative list of products not eligible, including alcohol, tobacco and petrol. It also became apparent that Member States wish to retain their current derogations (see EUROPE 12707/22).
In a note prepared for the meeting, the Presidency explains that its latest compromise text did not reach consensus in the working group on 1 June. A number of questions remain open, including the question of existing derogations.
On this point, Lisbon proposes to include a ‘standstill clause’ which would allow Member States to continue to apply their current derogations concerning the application of reduced rates, parking rates, zero rates, super-reduced rates or their exemptions - with the exception of those concerning fossil fuels, pesticides and chemical fertilisers.
However, in order to ensure equal treatment of all EU countries, the derogations allowed under this standstill clause would then become available to all EU Member States, provided that they inform the VAT Committee before 1 January 2023. The Presidency would like to know whether such a solution would be acceptable to the Member States.
It also seeks Member States’ views on its proposal to phase out environmentally harmful goods from the possibility of applying reduced rates, including pesticides, chemical fertilisers, firewood and natural gas, by 1 January 2035, through a ‘sunset clause’. This would allow the list to be adapted to the objectives of the European Green Deal.
As regards zero and super-reduced rates, the Presidency also proposes to restrict them to a limited set of supplies of goods and services that meet basic needs and clear public policies, linked for example, to food and water, health products, passenger transport or even certain cultural items and solar panels.
The Member States’ ambassadors to the EU (Coreper) will discuss this issue on Friday 11 June. See the note: https://bit.ly/3zaQrEf (Original version in French by Marion Fontana)