Brussels, 26/06/2008 (Agence Europe) - A review of European rules on reduced rates of value added tax (VAT) on labour intensive services, provided locally and to the end consumer, is among the initiatives announced on Wednesday as part of the Small Business Act for Europe (see EUROPE 9690). The previous day, European Taxation Commissioner Lásló Kovács gave an outline of the draft directive which he will present to the European Parliament economic and monetary affairs committee on Monday 7 July. He suggests that a reduced VAT rate could be applied to the whole housing sector.
Member states could be given increased but still limited “flexibility” “where there is no real risk of distortion of competition for the internal market,” Kovács told MEPs. The Commission's intention is to give those EU countries which want it the opportunity to permanently apply reduced VAT rates to those services for which a reduced rate experiment is running until 31 December 2010. The services involved (Annex IV of directive 2006/112/EC) are: - the repair of bicycles, shoes, leather goods, clothes and household linen; - renovation and repair of private dwellings; - the cleaning of windows and private dwellings; - help and home care services for children, the elderly, the ill and the handicapped; - hairdressing. The proposal is likely to focus on services for which a decision is needed urgently since temporary arrangements expire at the end of 2010, Kovàcs said.
He also suggested extending the permanent list of goods and services to which reduced VAT rates could be applied (Annex III of directive 2006/112/EC). This list could include the whole of the housing sector. “The limitation to housing as part of 'social policy' should be deleted, and a reduced rate would be made possible for the whole sector, including renovation, repairing, and cleaning currently covered by the labour intensive services experiment,” Kovács said. He set out the other services to which a reduced rate could be permanently applied: - catering services; - gardening, landscaping and maintenance of gardens; - ironing and laundry; - beauty care. It has not yet been decided whether places of worship and historic monuments will be included. The commissioner said that some “technical adaptations” will be made to allow reduced rates for equipment for handicapped persons, services related to waste treatment, nappies and audiobooks.
The commissioner repeated that, at this stage, the proposal would not, despite the Franco-British request, include provisions for reduced rates for energy efficient goods. “This proposal will not include provisions concerning reduced rates for energy saving materials or energy efficient goods. … Taking a hasty measure without assessing its efficiency and cost might prove to be wrong,” he noted. The Commission has begun four studies on instruments, including VAT rates, which can have a role to play in increasing the use of energy efficient goods and energy saving materials. (M.B./transl.rt)