Brussels, 18/12/2003 (Agence Europe) - The Permanent Representatives of Member States (Coreper) reached an agreement on Thursday to extend the current reduced VAT rate system by two years for high labour intensive work. On 22 December, the Environment Council is expected to adopt without discussion a political agreement pending the stance taken by the Parliament, which was invited by the European Council in Brussels to give its opinion as a matter of urgency.
During Coreper discussions, the Czech Republic, followed by Poland, Slovenia and Cyprus also asked to benefit from this extension, since the reduced rate regimes were in principle to be dismantled in the new Member States as of their accession next May. The Benelux countries backed this request. Germany, Austria, Denmark and Sweden were opposed. The Commission was invited to examine the request of acceding countries.
We recall that the VAT system for high labour intensive services is applied in nine Member States for: 1) small repairs to bicycles, leather and shoes, clothing and household linen; 2) renovation and repair of private housing; 3) window washing and cleaning services for private homes; 4) homecare services; and 5) hairdressing.
On the fringe of the European Council in Brussels, the Finance Ministers pledged, moreover, to resume discussion on the new lists of services and products benefiting from reduced VAT rates, during the Ecofin Council of 20 January. Germany is still opposed to adopting this list, including restaurant services, so dear to France. It fears being subject to pressure from its own restaurant and catering sector, which is going through a period of budgetary restraint.
Austria, which had created a link between this decision and VAT problems on car hire, seems to have relegated its demands to the background. It seems reassured by the positions taken by the European Commission, which announces that the problem of leasing should be resolved in the context of the proposals that it will soon make to tax services in the country where the service is provided and no longer in the country where the service provider resides.