Brussels, 21/11/2003 (Agence Europe) - The chances of reaching an agreement on VAT reductions during Tuesday's Ecofin meeting are at a minimum. Germany and to a certain extent, the Scandinavian countries are still opposed to the adoption of a list of products and services that can benefit from reduced VAT rates. All of them are for the instant digging in their heels. France is appealing for a reduced VAT rate of 5.5% in the restaurant trade and construction industry; the United Kingdom, Ireland and Luxembourg want zero rates on clothing and footwear for children; Portugal want to keep the current system in favour of the Azores etc.
If no compromise is found on Tuesday, the Council will look at the issue during its meeting on 16 December. If there is no agreement, the current legislation, which defines the list of "high labour intensive" services receiving tax discounts will become outmoded at the end of this year. The Commission has indicated that "it does not intend to extend it, contrary to that hope by some quarters".
The French Minister of the Economy Francis Mer pointed out on Thursday on the LCI information channel that he did not think that he would have a satisfactory result on restaurants given that there are "other requests from other countries that involve other reductions or consolidation for reduced VAT". An alternative looks like its being prepared. The Commission could authorise France to lower its employers' labour costs in the restaurant business. France hopes to obtain an agreement on reduced VAT rates in renovations work and personal assistance services subject to European approval I the tax measures for the 2004 budget adopted on Tuesday at the French National Assembly.