Brussels, 25/11/2003 (Agence Europe) - The Ecofin Council called upon the European Commission to unanimously support a two-year extension of the current reduced VAT rate for services with high labour intensity, to expire end December. This extra time would allow discussion to be continued on the new proposals for harmonising reduced VAT rates, over which France and Germany still differ. Commissioner Frits Bolkestein immediately refused to make a proposal for extending the current system, while pointing out that the Commission would refrain from opening infringement procedures during six months.
On Monday, Mr Bolkestein had repeated before the European Parliament's Committee on Economic Affairs that, according to the Commission's analysis, the experience of reduced rates on high labour intensive services had been a "failure". The assessment report were very disappointing, he said, both in terms of job creation and for reducing undeclared work. The experience that was to last three years has already been extended by one more year and now "we cannot contemplate doing it again to make permanent a system that should only be temporary", he said.
The above analysis is not shared by the representatives of SMEs in Brussels. According to UEAPME, doing away with the current system would threaten 200,000 to 250,000 jobs in Europe, including 90,000 in France. UEAPME considers that the Commission report distorted the data sent by Member States in so far as, according to the report by the Netherlands, the system would have allowed 7% growth in employment for hairdressers and 4% for painters and decorators.