Proposal for a Council Directive amending, with regard to the level of the standard rate, Directive 77/388/EEC on the common system of value added tax (98/C 409/09) COM(1998) 693 final - 98/0331(CNS)

(Submitted by the Commission on 30 November 1998)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 99 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas Article 12(3)(a) of the Sixth Council Directive 77/388/EEC (1) 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, as last amended by Directive 98/80/EC (2) lays down that the Council shall decide on the level of the standard rate to be applied after 31 December 1998; whereas the standard rate of value added tax is fixed by each Member State as a percentage of the taxable amount and is the same for the supply of goods and for the supply of services; whereas from 1 January 1993 until 31 December 1998, this percentage may not be less than 15 %;

Whereas experience under the existing taxation system has shown that the standard rates of value added tax currently in force in the various Member States, combined with the safeguards built into that system, have ensured that the transitional system of value added tax has, on the whole, functioned satisfactorily; whereas widening disparities in the standard rates of value added tax in the various Member States could, on the other hand, create a structural imbalance in various business sectors; whereas the existing range of standard rates of value added tax applied in the various Member States leaves Member States considerable leeway in fixing the level of the standard rate; whereas, consequently, a more extensive adjustment to standard rates of value added tax would not be appropriate at present;

Whereas, however, the Commission report on rates highlighted the fact that distortions of competition exist and are likely to be accentuated by the introduction of the single currency; whereas the period of application of the standard rate should be limited to one year in order to enable the Council at a later stage to decide on the levels of both the standard rate and reduced rates,

HAS ADOPTED THIS DIRECTIVE:

Article 1

Article 12(3)(a) of Directive 77/388/EEC is replaced by the following:

'a) The standard rate of value added tax shall be fixed by each Member State as a percentage of the taxable amount and shall be the same for the supply of goods and for the supply of services. From 1 January 1999 until 31 December 1999, this percentage may be no lower than 15 % and no higher than 25 %.

On the basis of a proposal by the Commission and after consultation of the European Parliament, the Council shall decide unanimously on the level of the standard rate to be applied after 31 December 1999.

Member States may also apply either one or two reduced rates. These rates shall be fixed as a percentage of the taxable amount which may not be less than 5 % and shall apply only to supplies of the categories of goods and services specified in Annex H.`

Article 2

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 1 January 1999 at the latest. They shall forthwith inform the Commission thereof.

When Member States adopt these provisions, these shall contain a reference to this Directive or shall be accompanied by such reference at the time of their official publication. The procedure for such reference shall be adopted by Member States.

2. Member States shall communicate to the Commission the text of the provisions of domestic law which they adopt in the field covered by this Directive.

Article 3

This Directive shall enter into force on the seventh day following its publication in the Official Journal of the European Communities.

Article 4

This Directive is addressed to the Member States.

(1) OJ L 145, 13.6.1977, p. 1.

(2) OJ L 281, 17.10.1998, p. 31.