# C_2005294EN.01005401.xml

| 25.11.2005 | EN | Official Journal of the European Union | C 294/54 |
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25.11.2005

EN

Official Journal of the European Union

C 294/54

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Opinion of the European Economic and Social Committee on the Proposal for a Council Directive amending Directive 77/388/EEC on the common system of value added tax, with regard to the length of time during which the minimum standard rate is to be applied

(COM(2005) 136 final — 2005/0051 (CNS))

(2005/C 294/10)

On 27 April 2005 the Council decided to consult the European Economic and Social Committee, under Article 262 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 22 June 2005. The rapporteur was Mr Burani.

At its 419th plenary session, held on 13-14 July 2005 (meeting of 14 July), the European Economic and Social Committee adopted the following opinion by 91 votes, nem. con. with 2 abstentions.

1.   Background

| 1.1 | Pursuant to the second subparagraph of Article 12(3)(a) of Directive 77/388/EEC, the Council, on a proposal from the Commission and having consulted the European Parliament and the European Economic and Social Committee, unanimously sets the level of the standard rate of VAT. In January 1993, the Commission presented some proposals for creating a regime of definitive tax harmonisation, but the Council was not able to adopt them as the required unanimity could not be achieved. |
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1.1

Pursuant to the second subparagraph of Article 12(3)(a) of Directive 77/388/EEC, the Council, on a proposal from the Commission and having consulted the European Parliament and the European Economic and Social Committee, unanimously sets the level of the standard rate of VAT. In January 1993, the Commission presented some proposals for creating a regime of definitive tax harmonisation, but the Council was not able to adopt them as the required unanimity could not be achieved.

definitive tax harmonisation

| 1.2 | Instead, agreement was reached on approximation of rates, with Directive 92/77/EEC setting a minimum rate of 15 %; the expiry date of that decision, originally set for 31 December 1996, was extended three times; the next expiry date is 31 December 2005. |
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1.2

Instead, agreement was reached on approximation of rates, with Directive 92/77/EEC setting a minimum rate of 15 %; the expiry date of that decision, originally set for 31 December 1996, was extended three times; the next expiry date is 31 December 2005.

minimum rate of 15 %

2.   The Commission proposal

| 2.1 | In view of the rapidly approaching expiry date, the Commission has presented a proposal to extend the existing directive until 31 December 2010. The current provisions remain unchanged: the standard rate cannot be lower than 15 % and the taxable amount is the same for the supply of goods as for the provision of services. |
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2.1

In view of the rapidly approaching expiry date, the Commission has presented a proposal to extend the existing directive until 31 December 2010. The current provisions remain unchanged: the standard rate cannot be lower than 15 % and the taxable amount is the same for the supply of goods as for the provision of services.

3.   The Committee's views

| 3.1 | Given the current situation of Member States' fiscal policies, particularly with regard to VAT, the Committee can only agree with the Commission's initiative, which is in practice a proper response to the circumstances. |
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3.1

Given the current situation of Member States' fiscal policies, particularly with regard to VAT, the Committee can only agree with the Commission's initiative, which is in practice a proper response to the circumstances.

| 3.2 | The Committee would nonetheless like to take the opportunity to make some additional comments, in the hope that these will receive the attention of Member States. |
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3.2

The Committee would nonetheless like to take the opportunity to make some additional comments, in the hope that these will receive the attention of Member States.

| 3.3 | The lack of unity of purpose of the Member States in the area of taxation, and of VAT in particular, is certainly nothing new: this has been the case since the European Union was founded, and the successive enlargements from the original six countries to the current 25 has served only to widen the divergence. Over the years, agreement has not even been reached on the Commission proposal for a range of minimum and maximum tax rates of 15 to 25 % (even if this is the range that exists in practice); an agreement on the uniform application of the principle of payment of VAT in the country of origin has proved even more elusive, and the argument for abolishing the numerous exemptions and derogations given to each Member State from time to time for various reasons and with expiry dates — where specified — that are hardly ever respected, has never been properly tackled. |
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3.3

The lack of unity of purpose of the Member States in the area of taxation, and of VAT in particular, is certainly nothing new: this has been the case since the European Union was founded, and the successive enlargements from the original six countries to the current 25 has served only to widen the divergence. Over the years, agreement has not even been reached on the Commission proposal for a range of minimum and maximum tax rates of 15 to 25 % (even if this is the range that exists in practice); an agreement on the uniform application of the principle of payment of VAT in the country of origin has proved even more elusive, and the argument for abolishing the numerous exemptions and derogations given to each Member State from time to time for various reasons and with expiry dates — where specified — that are hardly ever respected, has never been properly tackled.

lack of unity of purpose

| 3.4 | Given this background, talking about a ‘transitional system’ for VAT when referring to a system that has been in place for decades whilst awaiting a ‘definitive system’ that appears as problematic as ever, is a mystification that the EESC is no longer prepared to accept. The Council should state, for the sake of that transparency vis-à-vis citizens that it keeps talking about, that it will continue to pursue the strategic objective of VAT harmonisation, whilst accepting that this is not realistically achievable in the short to medium term. This will avoid wasting energy and resources on a futile attempt to achieve unanimity in areas that are of fundamental importance to the fiscal and social policies of each Member State, and which each of them therefore intends to maintain without concessions. |
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3.4

Given this background, talking about a ‘transitional system’ for VAT when referring to a system that has been in place for decades whilst awaiting a ‘definitive system’ that appears as problematic as ever, is a mystification that the EESC is no longer prepared to accept. The Council should state, for the sake of that transparency vis-à-vis citizens that it keeps talking about, that it will continue to pursue the strategic objective of VAT harmonisation, whilst accepting that this is not realistically achievable in the short to medium term. This will avoid wasting energy and resources on a futile attempt to achieve unanimity in areas that are of fundamental importance to the fiscal and social policies of each Member State, and which each of them therefore intends to maintain without concessions.

talking about a ‘transitional system’

is a mystification

the strategic objective

Brussels, 14 July 2005.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

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