WRITTEN QUESTION P-0054/00

by Caroline Lucas (Verts/ALE) to the Commission

(18 January 2000)

Subject: Review of Annex H of the sixth VAT Directive

Is the Commission planning a review of Annex H of the sixth VAT Directive? If so, when?

In its communication A Common System of VAT: A Programme for the Single Market (COM(96) 328 fin) the Commission outlined a timetable for approaching the definitive VAT system. Given the fact that the dates mentioned therein have already been passed without any real progress on the matter, could the Commission indicate when it expects to be able to come forward with a proposal for the final system?

Article 13 of the sixth VAT Directive stipulates that Member States shall exempt from VAT certain activities which are in the public interest, like welfare and social security work by charities, or services and goods provided by non-profit-making organisations with the aims of a religious, philanthropic, civic nature etc. However, these organisations have to pay full VAT on their inputs, which they cannot deduct. Consequently, these organisations are sometimes put in an even more disadvantageous situation than if they were taxable. Does the Commission agree that this effect runs counter to the spirit of Article 13 of the sixth VAT Directive?

Does the Commission agree that it should take immediate action with the aim of ending this situation without waiting for the definitive system to be installed?

Will the Commission, in its proposal for a definitive VAT system, make provision to exempt from VAT those inputs that are directly linked to the work of charities?

Answer given by Mr Bolkestein on behalf of the Commission

(10 February 2000)

The Commission acknowledges that the timetable set in the programme for a new common system of VAT, as set out in its communication of 1996, has not been kept to, as the Honourable Member points out, and that there is currently an impasse with regard to this issue. The 1996 programme proposed phasing in a definitive system, the first phase to be modernisation and more uniform application of the current VAT system, via amendments leading to the new common system of VAT. To this end, the Commission presented a number of proposals to the Council, but the latter could not agree on adopting them. In these circumstances, the strategy to be adopted for VAT must be reviewed with the full collaboration of the Member States. However, effective action on this issue is still needed in order to improve the functioning of the internal market. Such action might initially involve improving the current system of VAT, without this necessarily being seen as leading to a new common system of VAT.

Revision of Article 13 may prove necessary in modernising and simplifying the current system of VAT. However, it is too soon to say what specific amendments are needed.

Revision of Annex H, on the other hand, is not an immediate priority. Indeed it seems preferable at this stage to await the implementation by the Member States of Council Directive 1999/85/CE of 22 October 1999 amending Directive 77/388/EEC as regards the possibility of applying on an experiment basis a reduced VAT rate on labour-intensive services(1). We will then be in a position to draw lessons from this experiment, which will be the subject of a detailed report by the Member States concerned and the Commission by the end of 2002. A more in-depth revision of Annex H might then be proposed on the basis of this report.

(1) OJ L 277, 28.10.1999.