Brussels, 20/06/2002 (Agence Europe) - On Thursday, the European Commission confirmed that it was not going to allow France to reduce VAT in the hotel and catering industry before the revision in 2003 of the 1999 decision on lowering VAT in "labour intensive services". The Commission is expected to carry out a study on the effects of this decision that will direct the new decision expected to be reached by unanimity by Member States.
On Thursday, the French Minister for the budget, Alain Lambert, declared that, "The governments re-affirms its determination to see a rate of 5.5% VAT in hotel and catering. This is a legitimate demand". He also stressed that a number of other countries in the Union would benefit. The French Minister of the Economy, Francis Mer, addressed a letter to Commissioner Frits Bolkestein requesting authorisation for the rate of VAT in hotel and catering to be reduced from its current 19.6% to 5.5%, as Jacques Chirac promised during his campaign.
Jonathan Todd, spokesman for Commissioner Bolkestein, explained on Thursday that it was the Council that had drawn up the list of services that would benefit from the reduced rate, in 1999. "The Commission is not always able to agree with decisions taken by the Council, but once they are adopted, it is role of the Commission to ensure that the Treaty is applied", he stressed. "This involves a decision arrived at unanimity by Member States and is not a dictat made by Bureaucrats in Brussels", he insisted. He was keen to respond to a hostile press statement released by the French Hotel and Catering Industry Union, the UMIH, which said that it was shocked by the fact that the elections were hardly over before a Brussels Commissioner applied his veto one of the main commitments of the President of the Republic and his government during the election campaign.
Portugal has already been defeated on this issue when it tried to include the hotel and catering industry in the "labour intensive" services that benefit from lower VAT. German, Austria and France were opposed. "I am opposed to the hotel and catering industry being included because a third of the costs of this measure would like a present to tourists…hotel and catering is a luxury product and a reduction in VAT would especially benefit the rich", exclaimed the French Finance Minister at the time, Dominique Strauss-Kahn during an ECOFIN Summit on 12 July 1999.
Following difficult negotiations, Member States decided that reduced VAT would apply to the following services: 1) Small bicycle repair shops, shoe, leather goods, clothes and household linen shops; 2) Renovation and private accommodation repairs, 3) Private accommodation window cleaning, 4) Home care services; 5) Hair dressing.