A4-0252/98

Resolution on the report from the Commission to the Council and to the European Parliament in accordance with Article 12(4) of the Sixth Council Directive 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 (COM(97)0559 - C4-0119/98)

The European Parliament,

- having regard to the Commission report (COM(97)0559 - C4-0119/98),

- having regard to its resolution of 22 April 1997 on the Commission communication to the Council and the European Parliament on a common system of VAT - a programme for the Single Market (COM(96)0328 - C4-0458/96), ((OJ C 200, 30.6.1997, p. 41.))

- having regard to the report from the Commission to the Council and the European Parliament (second Article 14 report) on the application of Council Regulation (EEC) No 218/92 of 27 January 1992 on administrative cooperation in the field of indirect taxation (VAT) (COM(96)0681),

- having regard to its opinion of 5 September 1996 on the proposal for a Council directive amending Directive 77/388/EEC on the common system of Value Added Tax (level of the standard rate) (COM(95)0731 - C4-0153/96 - 95/0362(CNS)) ((OJ C 277, 23.9.1996, p. 25.)),

- having regard to its opinion of 12 December 1995 on the proposal for a Council directive amending Directive 77/388/EEC on the common system of value added tax (taxation of agricultural outputs) (COM(94)0584 - C4-0136/95 - 94/0324(CNS)), ((OJ C 17, 22.1.1996, p. 26.))

- having regard to its opinion of 22 September 1995 on the proposal for a Council directive amending Directive 77/388/EEC as regards the system of value added tax (taxation of agricultural outputs) (COM(94)0584 - C4-0136/95 - 94/0324(CNS) ((OJ C 269, 16.10.1995, p. 213.)),

- having regard to its opinion of 21 January 1993 on the proposal from the Commission to the Council for a directive amending Directive 77/388/EEC as regards the value added tax arrangements applicable to passenger transport ((OJ C 42, 15.2.1993, p. 170.)),

- having regard to its opinion of 20 November 1990 on the proposal for a Council directive supplementing the common system of value added tax and amending Directive 77/388/EEC ((OJ C 324, 24.12.1990, p. 97.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy (A4-0252/98),

A. whereas the abolition of tax frontiers in connection with the aim of completing the single market does not make it possible to ensure complete VAT neutrality with regard to cross-border transactions, given that VAT rates have not been the subject of full harmonisation among the Member States,

B. whereas, under the new common system of VAT, which is based on taxation in the country of origin, the rate of VAT will constitute an important price factor which will determine the competitive position of operators,

C. whereas, however, the wide range of VAT rates currently applied by the Member States is such that there is no prospect of full harmonisation in the near future, and whereas, therefore, with a view to the forthcoming implementation of the new common system of VAT, efforts should be made to move towards a situation in which the disparities between rates do not go beyond the bounds of acceptable tax competition,

D. whereas the transitional VAT arrangements, based on the principle of the country of destination in trade between taxable persons and the application of special arrangements, limits distortions of competition or deflections of trade caused by VAT; whereas, however, the current rates structure and, in particular, the scope of the reduced rates may distort the competitive position of certain taxable persons, notably on account of the optional nature of Annex H and the lack of common definitions of the categories of which it is composed,

E. whereas the continued integration of markets, amplified by the arrival of the single currency and the expansion of electronic trading, will intensify cross-border competition and necessitate fuller harmonisation of the system of VAT rates, even under the present transitional arrangements,

F. whereas, therefore, efforts can and must be made without delay to rationalise the structure of rates and bring them closer together with a view to achieving a degree of harmonisation compatible with the operation of the internal market,

G. whereas Annex H to the Sixth Directive needs to be made more specific and brought into line with the development of society,

H. whereas, given the naturally regressive nature of VAT, it must be possible to apply reduced rates for social reasons, in order to satisfy essential needs, including support for and protection of the special contribution made by NGOs and charities, and access to culture, not least in the forms related to the information society,

I. having regard, furthermore, to the lack of neutrality of Member States' tax systems as far as production factors are concerned, at the expense of jobs,

J. having regard to the importance of demonstrating in a powerful and tangible fashion the European Union institutions' determination to develop employment,

K. having regard to the beneficial employment impact which would be brought about by applying a reduced VAT rate to highly labour-intensive activities and also by the resulting decline in illegal working,

L. whereas there is a need to integrate environmental concerns into Union taxation, but preferably under the excise duty system or by creating a specific ecological tax,

M. whereas the rationalisation and modernisation of the scope of reduced rates of VAT must not have any significant impact on the level of public revenues and must accordingly be taken into account in discussions on the structure and level of rates,

N. whereas it is essential to embark without delay, on the basis of a realistic, progressive approach, on a process of approximation of rates to enable the new common system of VAT to be implemented under conditions of tax competition which are compatible with the internal market,

O. whereas such a process, if its aim is the blanket application of a reduced rate set at a minimum of 5%, must be based on the prior harmonisation of the scope of the reduced VAT rate(s) and on the gradual reduction of the disparities observed under the current transitional system,

P. whereas, in recognition of the particular role that NGOs in the EU play in the provision of charitable and welfare services, it must be possible to protect the application of the zero- and super-reduced rates which NGOs find so valuable in mitigating their existing VAT burden,

1. Welcomes the fact that the European Commission clearly places consideration of the scope of reduced rates in the context of the introduction of a new common VAT system, based on taxation in the country of origin;

2. Points out, however, that the current disparities in VAT rates among the Member States and the conditions under which reduced rates are applied give grounds for embarking immediately on a process of rationalisation of the structure of rates and their approximation, with a view to and in the interests of establishing a definitive system;

3. Accordingly requests the Commission to seek to lay down common definitions of goods and services falling under the categories which make up Annex H to the Sixth Directive, to which a reduced VAT rate may be applied;

4. Calls on the Commission simultaneously to rationalise and update the scope of those categories in Annex H, taking account of technological and societal change;

5. Calls in particular for application of the reduced rate for the supply, construction, restoration and conversion of housing to be uniformly applied throughout Member States, in particular in the case of the upkeep of social housing;

6. Calls in particular for the reduced rate for books to be extended to CD-ROMs with a content identical or analogous to that of books;

7. Reminds the Commission of its previous calls for a reduced rate of VAT to be applied to catering services;

8. Urges the Commission swiftly to come forward with a proposal for a directive on the application of a reduced VAT rate, on a trial basis, to certain labour-intensive services;

9. Calls on the Commission to incorporate into Annex H to the Sixth Directive all the existing or new categories of goods or services to which a reduced VAT rate may be applied either now or in the future and in particular both to the outputs of NGOs, as already allowed under Annex H, and to their inputs;

10. Calls on the Commission immediately to embark on the process of approximating VAT rates within the Union;

11. Suggests to the Commission that this process should be based, firstly, on the abolition of the derogations permitting application by a Member State of a rate other than the normal rate to goods or services not covered by Annex H to the Sixth Directive, updated where necessary, and that it should then involve requiring the Member States to apply one or two reduced VAT rates, not exceeding 14%, on the categories of goods and services defined in that annex;

12. Instructs its President to forward this resolution to the Commission and the Council.