Brussels, 10/12/2003 (Agence Europe) - The European Commission has agreed to extend by two years the current reduced rate of VAT on labour-intensive services, as the Ecofin Council had unanimously requested, as did the European Parliament. It is expected to put forward a proposal next week, which could be approved without discussion by a forthcoming Council (17 December at the Fisheries Council or 22 December at the Environment Council). This extension will allow the nine Member States which benefit from the current system to reduce VAT until 31 December 2005 on services including: 1) the small repairs of bicycles (Belgium, Luxembourg, Netherlands), shoes and leather goods (Belgium, Luxembourg, Netherlands), and clothing and household linen (Belgium, Greece, Luxembourg, Netherlands); 2) renovation and repair of private housing (Italy, France, Portugal, Isle of Man in the United Kingdom, Belgium, Netherlands); window cleaning and the cleaning of private housing (France and Luxembourg); home care services (France, Greece, Italy, Portugal); and 5) hairdressing (Spain, Luxembourg, Netherlands).
As no agreement had been reached on the new list of products and services benefiting from reduced VAT proposed in July this year, the Council had called on the Commission to extend this "experimental" system which was to expire end December (see EUROPE of 26 November, p.7). Germany is opposed to this new list which was above all to include a reduction of VAT on restaurant services, so dear to France. Commissioner Frits Bolkestein's spokesperson, Jonathan Todd, stressed on Wednesday that, contrary to what is being said in France, the Commission is not hostile to a reduced VAT rate on restaurant services, as it proposed this in July. It is, he says, the Member States that cannot come to an agreement.
The Italian Presidency confirmed that it does not plan to organise an extraordinary Ecofin Council to seek an agreement on the new list of "reduced rates" contrary to what Jean-Pierre Raffarin is said to have hoped. The question could be raised by France during the European Council this weekend.