Brussels, 06/11/2007 (Agence Europe) - During the Ecofin Council on Tuesday 13 November, European finance ministers begin an orientation debate on the Commission's communication to simplify and rationalise the European system for reducing value added tax (VAT) (EUROPE 9462). Transversal decisions are not expected at this stage and the Commission is counting on legislative proposal in 2008, indeed 2009. Nevertheless, the communication is accompanied by a draft directive proposing to get rid of certain services or extend them until the end of 2007. At the end of October, the experts group at the Council obtained a broad agreement on the mainstay of this legislative proposal, with only three delegations expressing reservations. Germany and Denmark are afraid that an extension of reduced rates will affect the outcome of future discussions. France would prefer reduced rates to be extended until 30 June 2009.
According to the legislative proposal, the Czech Republic and Slovakia will be authorised to continue applying a reduced rate of at least 5% for construction work provision in the private housing sector (not developed out of social policy considerations) except for construction materials. The same thing applies for Cyprus and Poland where restaurant services may continue to benefit from reduced rates of at least 5% and 7% respectively. On the other hand, Estonia is expected to get rid of its reduced rate on the supply of heat energy to natural persons and some associations working in the housing sector. In Hungary, the supply of coal, fire wood and restaurant services are not expected to continue benefiting from a reduced rate of at least 12%.
In its communication on reduced VAT rates, the Commission suggests a two-tier structure: the first involves goods and essential services such as food, which may benefit from reduced rates of between 0 and 5%; the second would be optional and include other goods and services that warrant less preferential treatment for environmental or cultural reasons; or those linked to employment, energy or public transport. (M.B.)