Brussels, 04/11/2008 (Agence Europe) - Discussion on reform of European rules on reduced rates of value added tax (VAT) did not move forward during the Ecofin Council on Tuesday 4 November. Germany is still blocking an agreement on a proposal for compromise (see EUROPE 9698) and is supported by Austria, Denmark, Estonia and, to a lesser extent, by Latvia and Lithuania. The French EU Presidency nonetheless hopes unanimous agreement will be reached in December. “We have agreed to pursue work at the level of experts and national ambassadors in order to reach an agreement by the end of 2008”, said Christine Lagarde, President of the Ecofin Council.
Germany has sent a very firm message, saying the approach on a case by case basis must be replaced by an approach aimed at rationalising the European jungle of reduced VAT rates. The debate is a “source of frustration for myself and irritation for you”, German Finance Minister Peer Steinbrück reportedly said. Taking a step towards the reticent countries, the French Presidency has suggested that the member states that wish to introduce a reduced VAT rate for the first time should carry out a study to prove the economic timeliness of the measure envisaged (see EUROPE 9769). The Commission would then assess the results of the study. This “impact survey” would serve to demonstrate the “economic grounds” for reduced taxation, its budgetary feasibility and the lack of negative impact on the internal market, a diplomatic source said. The draft compromise also suggests applying reduced taxation to work and services intended to reduce the environmental impact of certain buildings. (M.B./transl.jl)