Europese Commissie wenst eenvoudiger regels om BTW-tarieven te verlagen (en)
The European Commission has just presented a proposal for simplifying the rules on reduced rates of VAT in order to ensure its more uniform application. The purpose of the proposal is to afford Member States equal opportunity to apply reduced rates in certain fields (e.g. restaurants, housing and the supply of gas and electricity) and to rationalise the numerous derogations currently applying in some Member States. The aim is to improve the functioning of the internal market and avoid potential distortions of competition, which have given rise to numerous complaints from traders. Following the experimental application of a reduced VAT rate to certain labour-intensive services, the Commission is convinced that the reduced rate had very little, if any, impact on prices or job creation. A reduction in VAT rates would therefore seem to be a waste of budget resources which could be deployed more usefully.
"To improve the functioning of the internal market we need to ensure a more level playing field for all the Member States, including the new ones, and put an end to distortions arising from the fact that some Member States are allowed to charge reduced rates of VAT in certain sectors while others are not", said Frits Bolkestein, European Commissioner for taxation and the internal market. "Also, a reduction in VAT rates is never passed on in full in consumer prices. Very often it is negligible and temporary."
Main thrust of the proposal
The Commission's aim was to seek a balanced approach for the whole of the European Union. This required going beyond a review of the restrictive list of goods and services to which a reduced VAT rate may be applied (Annex H to the Sixth VAT Directive) and examining the various specific derogations available to some Member States, with a view to avoiding potential distortions of competition. The proposal also includes appropriate measures for a final decision on the VAT rate applicable to labour-intensive services. It does not call into question the optional nature of reduced VAT rates: no Member State will be obliged to introduce new reduced VAT rates.
Rationalisation of the list of goods and services
Rationalisation of the list of goods and services to which the Member States have the option of applying reduced rates (Annex H) is based on the following:
- the option of applying reduced rates is not extended to new categories to which no Member State currently applies reduced rates;
- the option of applying reduced rates is extended to categories of goods and services to which certain Member States are already applying reduced rates by virtue of specific derogations with no apparent detriment to the smooth functioning of the internal market. This measure concerns restaurants, housing and the supply of gas and electricity;
- the option, currently granted on a transitional basis, of applying a reduced rate to cut flowers and plants is definitively incorporated into Annex H;
- two technical changes have been introduced: category 4 (equipment for the disabled) has been clarified, as has the category concerning sewer, waste treatment and recycling services and street cleaning services.
Rationalisation of other reduced rates
It is proposed that this be achieved by:
- abolishing the derogations that permitted certain Member States to maintain reduced rates for goods and services not listed in Annex H ("parking rates");
- confining zero and super-reduced rates (below the 5% minimum) to goods and services listed in Annex H.
Rationalisation of reduced rates in certain areas
Certain Member States have been authorised to apply rates lower than those they normally apply to take account of the special geographical situation of certain island or remote areas. These provisions are meaningful only if strictly confined to the local market. The Commission proposes rationalising these derogations in order to establish a clear legal basis for each of them and to prevent abuses by restricting their application to goods and services consumed in the areas concerned (e.g. the application of reduced rates to distance services supplied throughout the EU). The Member States concerned are Austria, Greece, France and Portugal.
Other technical amendments
It is proposed that the scope of reduced rates be reviewed every five years rather than every two years: experience has shown that a period of two years is too short for genuinely new factors to emerge. Where absolutely necessary the Commission can present to the Council a proposal for a directive amending the rules applicable to rates before expiry of the five-year period.
General background
The current situation as regards rates is far from satisfactory. The VAT rates applicable in the Community remain highly disparate and very complex. Yet the basic rules are simple: supplies of goods and services subject to VAT are normally subject to a standard rate of at least 15%, but the Member States may opt to apply one or two reduced rates of not less than 5% to goods and services listed in Annex H (restricted list of goods and services eligible for a reduced rate in the Member States).
However, these simple rules are complicated by a multitude of derogations granted to certain Member States - in some instances a majority of Member States - during the negotiations preceding Directive 92/77/EEC or their Acts of Accession, derogations which are denied to the others. The rationale for these situations is far from clear and a final decision needs to be taken to either abolish the derogations or open them to all Member States.
The situation has given rise to many complaints by traders, reflected in the Commission's 2001 report on reduced rates.
The report can be consulted on the following EUROPA site:
http://europa.eu.int/comm/taxation_customs/publications/official_doc/com/com.htm
Furthermore, in terms of effects on consumption, the Commission remains convinced that the reduction of VAT rates is not the best way of encouraging consumers to buy or use certain goods or services. VAT, unlike excise duty for example, is not designed to change consumer behaviour. Also, a reduction in VAT rates is never passed on in full in consumer prices: often it is negligible and temporary.
The Commission also considers that the main objective of VAT is to generate tax revenue: each Member State uses this revenue according to its own priorities. It should not be used to subsidise particular sectors.
The evaluation report on the experimental application of reduced rates for labour-intensive services (see IP/02/1367) adopted by the Commission on 2 June 2003 concluded that it was impossible to identify with any certainty any beneficial impact on employment or a reduction in the black economy as a result of reducing VAT rates. Compared with measures that directly target labour costs, the budgetary cost per job created by VAT cuts is always higher (euro for euro, reducing labour charges creates 52% more jobs than reducing VAT rates). It is therefore necessary to examine whether reducing taxes and charges other than VAT would not be a better way of boosting employment. The report, together with the reports of the Member States that took part in the experiment, can be consulted on the following EUROPA site:
http://europa.eu.int/comm/taxation_customs/taxation/labour_intensive/labour_intensive_en.htm
The proposal and enlargement
This proposal must be seen in the context of the upcoming enlargement of the EU. In the recent negotiations, the Commission and the Council agreed on a rigorous approach to VAT-rate derogations granted to the new countries: all the derogations granted were strictly limited in time, with the last one expiring on 1 January 2010. This should be taken into account in the review of the temporary derogations currently enjoyed by certain Member States. The EU must ensure more equitable treatment of all Member States, both old and new. This proposal, which advocates applying all derogations from the standard rate only to goods and services that are eligible for reduced rates, is an important step in this direction.
The proposal for a Council directive amending Directive 77/388 /CEE as regards the scope of reduced VAT rates is available on the following Europa site: