WRITTEN QUESTION P-2697/02

by Dominique Souchet (NI) to the Commission

(18 September 2002)

Subject: Reduced VAT rates in the restaurant sector

On 14 May 2002 the European Parliament adopted a text (the Torres Marques report) entitled: European tourism: European Parliament resolution on the Commission communication to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on working together for the future of European tourism (P5_TA(2002)0222).

In paragraph 46 of this text, Parliament

calls on the Commission to draw up at the earliest opportunity proposals to include the restaurant sector, and possibly other as yet ineligible tourist services, on the list of sectors of activity entitled to a permanent reduction in the VAT rate, so as to boost employment and modernisation in the industries concerned and make European tourism better equipped to deal with international competition.

Can the Commission say what action it has taken on this request by Parliament?

Answer given by Mr Bolkestein on behalf of the Commission

(24 October 2002)

As announced in its communication on the new VAT strategy(1) and mentioned in its report on reduced rates adopted in October 2001(2), the Commission intends to carry out a comprehensive review of the structure of reduced rates in the first half of 2003. As part of this exercise, an examination will be made of the restaurant sector and all reduced rate applications from other categories. However, before beginning this comprehensive review, the Commission has to present a report on the impact of applying a reduced rate of VAT to labour-intensive services.

In 1999, the Council adopted Council Directive 1999/85/EC of 22 October 1999 allowing the application of a reduced rate of VAT to labour-intensive services(3). In this context, restaurant services could have qualified for a reduced rate if the Council had not modified the Commission's proposal during the negotiation of this directive. The Commission had drawn up its initial proposal(4) in such a way as to allow the Member States maximum flexibility in the choice of sectors concerned provided the sectors satisfied the set conditions. Restaurant services could thus have qualified for this exercise. The Council preferred to adopt a short and concise list and did not deem it appropriate to include the restaurant sector. This sector does, however, enjoy a reduced rate in some Member States but by way of a temporary derogation (granted in the negotiation of Annex H to the sixth Council 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)(5).

Directive 1999/65/EC was adopted as an experiment in order to ascertain the effect of a reduction in VAT rates on employment. The experiment, scheduled to last three years, is due to end on 31 December 2002. The Member States taking part in the experiment must submit a report to the Commission by 1 October 2002 assessing the effects of the alleviation of VAT on these services in terms of job-creation and the reduction of the underground economy. The Commission will then present an overall assessment report to Parliament and the Council and, if appropriate, propose measures for deciding the future VAT rate applicable to labour-intensive services. Given the time needed for this evaluation exercise and the decision-making process that may ensue, the Commission has adopted a proposal for a Directive(6) extending the experiment for a year.

(1) COM(2000) 348 final.

(2) COM(2001) 599 final.

(3) OJ L 277, 28.10.1999.

(4) OJ L 187, 20.7.1999.

(5) OJ L 145, 13.6.1977, Directive last amended by Directive 2002/38/EC OJ L 128, 15.5.2002.

(6) COM(2002) 525 final.