WRITTEN QUESTION E-1285/01

by Theresa Villiers (PPE-DE) to the Commission

(3 May 2001)

Subject: VAT

1. Could the Commission confirm that it continues to hold the definitive country of origin VAT system as its long-term goal? Does the Commission believe that greater VAT harmonisation is desirable?

2. Could the Commission confirm that the UK's zero rating system, currently used for children's clothes and newspapers, is still regarded as a transitional measure pending the adoption of the common VAT system, as expressed by Commissioner Bolkestein in his response to Parliamentary Question E-1635/00(1) of 5 July 2000?

3. Could the Commission confirm that accession countries are expected to introduce full VAT rates on items such as children's clothes, shoes and nappies on joining the European Union?

4. Could the Commission explain the work currently being undertaken in the field of VAT, and does it include a new work programme?

5. If so, what are the Commission's priorities under the new work programme, and has the programme been discussed by the Member States?

6. Has the Commission made any progress on any of the potential future priorities set out in COM(2000) 348:

- Treatment of subsidies, public authorities and services in the public interest,

- Treatment of financial and insurance services,

- Court judgements,

- Rules on supplies of goods,

- Closer administrative cooperation,

- Coordination of customs and taxation,

- Review of the place of taxation of services in general (Article 9),

- Rationalisation of derogations under Article 27,

- Rationalisation of options, rights and derogations,

- Rationalisation of VAT rates,

- The scheme applying to small businesses?

(1) OJ C 72 E, 6.3.2001, p. 92.

Answer given by Mr Bolkestein on behalf of the Commission

(4 July 2001)

1. As stated in its Communication to the Council and the Parliament of 7 June 2000 on the New VAT Strategy(1), the Commission considers that the Internal Market would function better with a VAT system based on taxation in the Member State of origin rather than with the transitional system in force at the moment. Therefore, the Commission has not questioned the definitive system as a long-term Community goal. However, the Commission considers that there are a number of areas in the existing VAT arrangements where further harmonisation is necessary in the short term in order to improve the functioning of the Internal Market.

2. The answer given to Written Question E-1635/00 by the Honourable Member on the British's zero rating system used for children's clothing and newspapers is still valid.

3. The Commission can confirm that the accession countries when joining the Union are expected to introduce the standard VAT rate on items such as children's clothes, shoes and nappies. However, for the moment one candidate country has requested a transitional period on such items, which is currently being negotiated in the Council.

4. A detailed explanation of the work currently being undertaken in the field of VAT is set out in the above mentioned Communication. Under this new strategy two directives have been adopted by the Council (Council Directive 2000/65/EC of 17 October 2000 amending the sixth VAT Directive 77/388/EEC 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(2), as regards the determination of the person liable for payment of value added tax(3) and Council Directive 2001/41/EC of 19 January 2001 amending the sixth VAT Directive (77/388/EEC) with regard to the length of time during which the minimum standard rate is to be applied(4)). In addition, a political agreement has been reached on the proposal for improving mutual assistance on recovery and work is currently continuing on several other proposals in the Council.

5. and 6. In March 2001, the Commission presented to the Member States, in the Tax Policy Group, an evaluation of the progress concerning the new strategy and identified new priorities for 2001. In this context the Commission plans to present new proposals involving the recasting of the sixth VAT Directive, the place of supply of goods and the special arrangements for travel agents. In addition, in order to be able to put forward further formal proposals in 2002/2003, the Commission is also planning to initiate preliminary work on other subjects such as the treatment of subsidies, activities of public authorities and services in the general interest; the co-ordination of customs and taxation rules; rationalisation of derogations under Article 27 of the 6th Directive, follow-up to Simpler legislation for

the internal market (SLIM) and a revision of provisions on the place of taxation of services. Nevertheless, the presentation of further new proposals by the Commission will largely depend on the progress made by the Council in adopting the proposals already tabled.

(1) COM(2000) 348 Final.

(2) OJ L 145, 13.6.1977.

(3) OJ L 269, 21.10.2000.

(4) OJ L 22, 24.1.2001.