Brussels, 25/09/2002 (Agence Europe) - On Wednesday, the European Commission adopted its proposal to extend the special VAT system to high labour intensive services. This deadline will enable a complete revision to be prepared for reduced VAT rates applied in this kind of service, cultural product or by specific dispensation to one or a number of Member States. France's request to obtain reduced VAT in hotel and catering will be examined in this context. Implemented in 2000 for an experimental period of three years to help stimulate job creation and fight against moonlighting, the system enables nine Member States (Fr, Sp, NL, Port, UK, Gr) which made the request to apply reduced VAT rates on a list of services: repairs (bicycles, shoes, clothes), renovation and cleaning of private homes, home-helps, hairdressing.
In the framework of the 6th Directive of VAT, Member States are obliged to apply a minimum VAT rate of 15% on goods and services. Minimum reduced rates of 5% can be applied to a list of products outlined in the directive, essentially in the social and cultural domains.
In a report presented in October 2001, the Commission appealed for a total re-examination of all dispensation and looked at a series of requests for dispensation for: removals, child minding, transport of funds and gardening (services which are highly labour intensive) including CD, CD-ROM and DVDs in the realm of cultural products, as well as certain hospital equipment and products which can enjoy the dispensation granted to the health sector.
For specifically labour intensive services, the Commission intends to present an analysis of the economic impact of the reduced rate of VAT. Member States are expected to in principle draw up a balance sheet of how the system has been applied, by 1 October.