P6_TA(2005)0468
VAT applied to highly labour-intensive services
European Parliament resolution on the expiry of Directive 1999/85/EC concerning reduced VAT
rates on labour-intensive services
The European Parliament ,
— having regard to the Presidency conclusions of the Vienna European Council of 11 and 12 December
1998, which called on the Commission ‘to allow those Member States who so desire to experiment
with reduced VAT rates on labour-intensive services which are not exposed to cross-border competition ’
in order to promote employment,
— having regard to Council Directive 1999/85/EC of 22 October 1999 amending Directive 77/388/EEC as
regards the possibility of applying on an experimental basis a reduced VAT rate on labour-intensiveservices (
1),
— having regard to the Report from the Commission to the Council and the European Parliament on the
experimental application of a reduced rate of VAT to certain labour-intensive services (COM(2003)0309),
— having regard to its position of 15 January 2004 on the proposal for a Council directive amending
Directive 77/388/EEC to extend the facility allowing Member States to apply reduced rates of VAT tocertain labour-intensive services (
2),
— having regard to its position of 4 December 2003 on the proposal for a Council directive amending
Directive 77/388/EEC as regards reduced rates of value added tax (3),
— having regard to its position of 14 December 2004 on the proposal for a Council Directive amending
Directive 77/388/EEC by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithua-
nia, Hungary, Malta, Poland, Slovenia and Slovakia (4),
— having regard to Rule 108(5) of its Rules of Procedure,
A. whereas the experiment with reduced VAT rates was strictly limited in time and concerned only the
services described in the new Annex K added to Directive 77/388/EEC (5) and whereas those provisions
expire on 31 December 2005,
B. whereas Directive 1999/85/EC provides that participating Member States must draw up a detailed
assessment of its impact in terms of job creation and efficiency, and that the Commission is requiredto submit a global evaluation report,
C. whereas this scheme was introduced on a temporary basis in 1999 and its aims included increasing
employment and reducing the black economy; whereas it was clearly indicated that the scheme wouldhave to be brought to an end after three years and whereas it has already been extended since,
D. whereas the Commission has also submitted a proposal for a directive amending Directive 77/388/EEC
as regards reduced rates of value added tax (COM(2003)0397), which is aimed at affording the MemberStates equal opportunities to apply reduced rates in certain fields and to rationalise the numerousderogations that currently apply in some Member States, which proposal is currently blocked in theCouncil,
E. whereas it would be difficult to terminate abruptly measures to which companies have become accus-
tomed,
(1) OJ L 277, 28.10.1999, p. 34.
(2) OJ C 92 E, 16.4.2004, p. 382.
(3) OJ C 89 E, 14.4.2004, p. 138.
(4) OJ C 226 E, 15.9.2005, p. 49.
(5) OJ L 145, 13.6.1977, p. 1.22.11.2006 EN C 285 E/149 Official Journal of the European Union
Thursday 1 December 2005
F. whereas Member States should be afforded equal opportunities to apply reduced VAT rates in certain
areas and pursue their social and cultural policies through a flexible system of indirect taxation,
G. whereas the provisions on the application of reduced rates of VAT, based on the principle of optionality,
are permissive and not prescriptive and do not give rise to a high level of cross-border distortion,
1. Urges the Council to prolong the experiment until the end of 2006, by which time the Commission is
requested to present a comprehensive evaluation based on the data collected during the whole period of theexperiment; suggests that this new evaluation take into consideration net job creation as well as the mech-anism that led to it, in order to have a broad overview of the economic impact;
2. Considers that the experiment has not been in force long enough to be accurately evaluated and that
the evaluation presented in 2003 was based on insufficient data;
3. Calls for account to be taken of the alarming situation regarding the expiry of the provisions in
question and an immediate switch to standard VAT rates that might lead to price increases and have a
negative impact on employment in the sectors concerned, and calls on the Commission and the Council
to take appropriate measures to avoid legal uncertainty as of 1 January 2006;
4. Following the evaluation, supports the inclusion in Annex H to Directive 77/388/EEC of those sectors
where results are satisfactory, thus making those derogations permanent, and calls on the Commission topresent a proposal containing a plan for phasing out the derogations for the sectors where no positiveresults have been achieved;
5. Calls on the Council to approve without further delay the proposal for a directive which was the
subject of its above-mentioned position of 14 December 2004 and which is aimed at allowing the newMember States to apply reduced rates to certain labour-intensive services if they so wish, putting an endto the current discriminatory situation;
6. Instructs its President to forward this resolution to the Council and the Commission.C 285 E/150 EN 22.11.2006 Official Journal of the European Union
Thursday 1 December 2005