Considerations on COM(1999)62 - Amendment of Directive 77/388/EEC as regards the possibility of applying on an experimental basis a reduced VAT rate on labour- intensive services

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dossier COM(1999)62 - Amendment of Directive 77/388/EEC as regards the possibility of applying on an experimental basis a reduced VAT rate on ...
document COM(1999)62 EN
date October 22, 1999
 
(1) Article 12(3)(a) of Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment(4) provides that the Member States may apply either one or two reduced rates only to supplies of goods and services of the categories specified in Annex H to Directive 77/388/EEC;

(2) however, the problem of unemployment is so serious that those Member States wishing to do so should be allowed to experiment with the operation and impact, in terms of job creation, of a reduction in the VAT rate on labour-intensive services which are not currently listed in Annex H;

(3) this reduced VAT rate is likely to reduce the incentive for the businesses concerned to join or remain in the black economy;

(4) however, the introduction of a targeted reduction in the VAT rate could have a negative impact on the smooth functioning of the internal market and on tax neutrality; provision should therefore be made for an authorisation procedure to be introduced for a full and clearly defined three-year period and for the scope of this measure to be made subject to strict conditions so that it remains verifiable and limited;

(5) in view of the experimental nature of the measure, a detailed assessment of its impact in terms of job creation and efficiency should be carried out by the Member States which implement it and by the Commission;

(6) the measure should be strictly limited in time and should end by 31 December 2002 at the latest;

(7) implementation of this Directive does not involve any amendment of the laws of the Member States.