Considerations on COM(1999)705 - Authorisation of Member States to apply a reduced rate of VAT to certain labour-intensive services in accordance with the procedure provided for in Article 28(6) of Directive 77/388/EEC

Please note

This page contains a limited version of this dossier in the EU Monitor.

 
dossier COM(1999)705 - Authorisation of Member States to apply a reduced rate of VAT to certain labour-intensive services in accordance with the ...
document COM(1999)705 EN
date February 28, 2000
 
(1) Under Article 28(6) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorise any Member State that has submitted an application in accordance with the procedure and conditions provided for in that Article, to apply a reduced rate of VAT to certain labour-intensive services.

(2) The services concerned must meet the conditions provided for in the Directive and be included in the list in Annex K to the Directive.

(3) This is an experiment limited to a maximum period of three years running from 1 January 2000 to 31 December 2002.

(4) However, the introduction of such a targeted reduction in the VAT rate entails some risk to the proper operation of the single market and tax neutrality. Provision should therefore be made for an authorisation period for a full and clearly defined three-year period, for the measure to be on an optional basis for Member States, and for its scope 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 Member States that have submitted an application have complied with the procedure and conditions set out in the Directive.

(7) Three Member States, France, Luxembourg and the Netherlands have applied for authorisation to apply a reduced rated of VAT exceptionally to a third category of the services listed in Annex K; in each case the reduction in rate in the third of the sectors selected can have only an insignificant economic impact.

(8) The United Kingdom has applied for authorisation to apply a reduced rate of VAT to dwelling-related services only in the Isle of Man. In the light of the specific territorial rules governing the status of the Isle of Man, including Article 299(6)(c) (ex 227) of the Treaty, the Treaty on the accession of the United Kingdom and Article 3(4) of Directive 77/388/EEC, and in the light of the fact that the rules on the location of such services will ensure that they are taxed where the dwelling is located, applying a reduced rate of VAT carries no risk of distortion of competition. However, restricting the reduced rate to the Isle of Man is something which can be authorised only as an exceptional measure. In relation to other territories of Member States where the Treaty and Directive 77/388/EEC are fully applicable, such a step could not be taken without jeopardising the principle of applying uniform rates in a single Member State.

(9) The other Member States have been informed about the applications for authorisation.

(10) This Decision will have no impact on the Communities' own resources derived from VAT.