Brussels, 11/03/2008 (Agence Europe) - The European Commission has initiated public consultation until 12 May 2008 on European legislation applying to reduced VAT (value added tax) rates . It calls on the interested parties to give their opinion of the impact that application of these reduced rates will have on prices in the various categories of goods and services, such as high labour intensive services provided locally. Special account will be taken of the opinion expressed by companies that consider they are subject to competition distortion within the internal market from companies established in member states where reduced VAT rates are in force.
Last December, EU finance ministers adopted conclusions on the continuation of work at European level with a view to simplifying the European “maquis” of reduced VAT rates (see EUROPE 9559). These conclusions do not give very clear indications to the Commission which will present a legislative proposal in July this year. This initiative will above all concern services of high labour intensity and provided locally (e.g. small repairs, hairdressing, cleaning, renovation of flats, etc.) covered by Directive 2006/112/EC until end 2010. The future draft directive will also cover catering services, a possibility that has long been called for by France. On the other hand, application of reduced rates to online press services and to electronic publishing is excluded as well as to energy-efficient products despite a Franco-British request (see EUROPOE 9532).
In July 2007, the Commission suggested setting up a two-tier reduced VAT rate structure: - the first level would concern goods and services of prime necessity, such as food, which could benefit from reduced rates between 0% and 5%; - and the second, which would be optional, would include other goods and services that would deserve less preferential treatment for environmental reasons, cultural reasons or reasons linked to employment, energy or public transport (see EUROPE 9462). In the EU, the minimum normal VAT rate is 15%. Application of reduced rates constitutes exemption to this rule. (M.B.)