# C_2008044EN.01012001.xml

| 16.2.2008 | EN | Official Journal of the European Union | C 44/120 |
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16.2.2008

EN

Official Journal of the European Union

C 44/120

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Opinion of the European Economic and Social Committee on the ‘Proposal for a Council Directive amending Directive 2006/112/EEC with regard to certain temporary provisions concerning rates of value added tax’

COM(2007) 381 final — SEC(2007) 910

(2008/C 44/26)

On 27 July 2007 the Council decided to consult the European Economic and Social Committee, under Article 95 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 8 October 2007. The rapporteur was Mr Burani.

At its 439th plenary session, held on 24-25 October 2007 (meeting of 24 October), the European Economic and Social Committee adopted the following opinion by 154 votes, nem. con., with four abstentions.

Conclusions and recommendations

Reasons

1.   Gist of the proposal

| 1.1 | The Commission has launched a broad debate on the use of reduced VAT rates, starting by publishing a Communication to the Council and the European Parliament (1). The main aim of this exercise is to pave the way for a new directive seeking sustainable, durable global solutions regarding reduced rates. ‘Reduced rates’ are rates below the customary VAT rate (15 %). |
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1.1

The Commission has launched a broad debate on the use of reduced VAT rates, starting by publishing a Communication to the Council and the European Parliament (1). The main aim of this exercise is to pave the way for a new directive seeking sustainable, durable global solutions regarding reduced rates. ‘Reduced rates’ are rates below the customary VAT rate (15 %).

1

reduced rates

| 1.2 | In the Communication published on the same day as the proposal, the Commission states that ‘Considerable time will be needed in order to identify the suitable way forward’. Meanwhile, the issue arises of temporary derogations granted to the Member States which have recently joined the EU. These derogations expire at various different points between June 2007 and 1 January 2010 (Articles 123-130 of the VAT Directive) (2). The simplest solution, adopted in the Commission proposal, is to propose that they be extended until the end of 2010, although the extension would not be general but limited to certain goods or services. Thus, the end of these derogations would fall together with the expiry of the minimum of 15 % for the standard rate and the end of the experiment on the application of reduced VAT rates to certain labour-intensive services. |
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1.2

In the Communication published on the same day as the proposal, the Commission states that ‘Considerable time will be needed in order to identify the suitable way forward’. Meanwhile, the issue arises of temporary derogations granted to the Member States which have recently joined the EU. These derogations expire at various different points between June 2007 and 1 January 2010 (Articles 123-130 of the VAT Directive) (2). The simplest solution, adopted in the Commission proposal, is to propose that they be extended until the end of 2010, although the extension would not be general but limited to certain goods or services. Thus, the end of these derogations would fall together with the expiry of the minimum of 15 % for the standard rate and the end of the experiment on the application of reduced VAT rates to certain labour-intensive services.

temporary derogations granted to the Member States which have recently joined the EU

2

extended

limited to certain goods or services

| 1.3 | The extension is granted for labour-intensive services (housing sector, restaurants etc.) and, where some countries are concerned, for goods which are of particular social importance (food, specialist periodicals and books, pharmaceutical products etc.). The reason for this is that the reduced VAT rate will in all probability continue to apply to all the countries after new rules have been drawn up as well. Derogations which conflict with the smooth functioning of the internal market are not extended (agricultural inputs). |
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1.3

The extension is granted for labour-intensive services (housing sector, restaurants etc.) and, where some countries are concerned, for goods which are of particular social importance (food, specialist periodicals and books, pharmaceutical products etc.). The reason for this is that the reduced VAT rate will in all probability continue to apply to all the countries after new rules have been drawn up as well. Derogations which conflict with the smooth functioning of the internal market are not extended (agricultural inputs).

labour-intensive services

particular social importance

| 1.4 | Coal and energy for heating, in particular, are excluded from the extension. The exceptions laid down in the various Acts of Accession are coming to an end (in 2007 or 2008) and no extensions are provided for. Moreover, taxation on energy sources is a separate issue which is currently being discussed; when solutions are found, they should apply across the board. |
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1.4

Coal and energy for heating, in particular, are excluded from the extension. The exceptions laid down in the various Acts of Accession are coming to an end (in 2007 or 2008) and no extensions are provided for. Moreover, taxation on energy sources is a separate issue which is currently being discussed; when solutions are found, they should apply across the board.

excluded

2.   General comments

| 2.1 | Directive 2006/112/EC laid down for Member States which joined the EU before 2001 a series of derogations
   (3). These derogations are open-ended or, to be more specific, apply until the entry into force of the ‘“
  definitive

  system” for intra-Community transactions’. As things stand, on the basis of experience, a definitive system is not likely to be introduced in the short or medium terms. The exemptions granted to the ‘old’ Member States could thus be extended almost indefinitely, while the ‘new’ Member States would be penalised by the expiry of the terms negotiated when the Acts of Accession were adopted. Moreover, some Member States are allowed to apply reduced rates to locally supplied services (4) until the end of 2010, while this opportunity does not exist for the others. This situation is untenable. |
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2.1

Directive 2006/112/EC laid down for Member States which joined the EU before 2001 a series of derogations
   (3). These derogations are open-ended or, to be more specific, apply until the entry into force of the ‘“
  definitive

  system” for intra-Community transactions’. As things stand, on the basis of experience, a definitive system is not likely to be introduced in the short or medium terms. The exemptions granted to the ‘old’ Member States could thus be extended almost indefinitely, while the ‘new’ Member States would be penalised by the expiry of the terms negotiated when the Acts of Accession were adopted. Moreover, some Member States are allowed to apply reduced rates to locally supplied services (4) until the end of 2010, while this opportunity does not exist for the others. This situation is untenable.

Member States which joined the EU before 2001

derogations

3

open-ended

definitive

system

The exemptions granted to the ‘old’ Member States could thus be extended almost indefinitely

4

| 2.2 | The proposal is a transitional solution which will enable the Member States which have recently joined the EU to operate on an essentially level playing field with the other Member States, at least until 31 December 2010. The Commission hopes that, by that date, the Council will have adopted the new directive bringing order to all exemptions across the board, as called for in the Communication. |
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2.2

The proposal is a transitional solution which will enable the Member States which have recently joined the EU to operate on an essentially level playing field with the other Member States, at least until 31 December 2010. The Commission hopes that, by that date, the Council will have adopted the new directive bringing order to all exemptions across the board, as called for in the Communication.

enable the Member States which have recently joined the EU to operate on an essentially level playing field

new directive

3.   Specific comments

| 3.1 | The EESC congratulates the Commission on its work: both the proposal for a directive, which it endorses unreservedly, and the publication of a Communication announcing the definition of an ‘exemption’ structure which is consistent with the principles of the single market and the Lisbon Strategy. The EESC will issue a specific opinion on the Communication, to make a constructive contribution to the debate. |
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3.1

The EESC congratulates the Commission on its work: both the proposal for a directive, which it endorses unreservedly, and the publication of a Communication announcing the definition of an ‘exemption’ structure which is consistent with the principles of the single market and the Lisbon Strategy. The EESC will issue a specific opinion on the Communication, to make a constructive contribution to the debate.

proposal for a directive

which it endorses unreservedly

| 3.2 | Previous experience would suggest that the general interest of reaching swift consensus on the proposal might take second place to defending particular interests and policies: the EESC hopes that this fear will prove unfounded. In terms of technical accuracy the proposal cannot be criticised: as the decision-making process progresses, only the political aspects will play a role. The EESC draws the decision-makers' attention to the needs of the market and the public, which require transparent, fair laws to be adopted without delay. |
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3.2

Previous experience would suggest that the general interest of reaching swift consensus on the proposal might take second place to defending particular interests and policies: the EESC hopes that this fear will prove unfounded. In terms of technical accuracy the proposal cannot be criticised: as the decision-making process progresses, only the political aspects will play a role. The EESC draws the decision-makers' attention to the needs of the market and the public, which require transparent, fair laws to be adopted without delay.

Brussels, 24 October 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

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(1)  COM(2007) 380 final of 5.7.2007.

1

(2)  Council Directive 2006/112/EC of 28.11.2006.

2

(3)  Articles 109 to 122 of the VAT directive.

3

(4)  See Annex IV to the VAT directive.

4

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