WRITTEN QUESTION P-2853/01 by Florence Kuntz (EDD) to the Commission. Imposition of VAT on service charges.
Date: 2001-10-08
Institutions: European Parliament, Provisional data
Subjects: France, VAT, catering industry, derogation from EU law, hairdressing and beauty care, judgment of the Court (EU), tax harmonisation

6.6.2002

EN

Official Journal of the European Communities

C 134 E/127

the Commission is proposing a
In order to promote the competitiveness of urban rail systems,
Regulation (1) on public service contracts in public passenger transport. This will require competent
authorities who wish to award exclusive rights or financial compensation to public transport operators to
put in place contracts and, in most cases, to award these contracts following a competitive tendering
procedure. This system of controlled competition has been shown to bring about increased passenger
numbers and improved efficiency, thereby improving competitiveness.

In addition, and as set out in the recent common transport policy White Paper (2), the Commission
proposes to support the overall improvement of urban transport. In particular, the White Paper sets out
that the Commission will provide funding for innovative towns and cities (for example, a number of the
participants in the Civitas initiative are improving their light rail systems) and identify and disseminate
good practice (for example: many participants in the citizen’s network benchmarking programme have or
are planning to introduce urban rail systems).

(1) OJ C 365 E, 19.12.2000.
(2) COM(2001) 370 final.

(2002/C 134 E/126)

WRITTEN QUESTION P-2853/01

by Florence Kuntz (EDD) to the Commission

(8 October 2001)

Subject: Imposition of VAT on service charges

On 1 October 2001 new rules entered into force in France making the imposition of VAT compulsory on
service charges claimed on behalf of staff in catering and hairdressing establishments.

Until this year, however, France had been exempted from this requirement as a result of Council Decision
89/487/EEC (1) of 28 July 1989 authorising the French Republic to apply a measure derogating from the
second subparagraph of Article 17(6) of the Sixth Directive 77/388/EEC (2) on the harmonisation of the
laws of the Member States relating to turnover taxes.

It was only following a decision of the Court of Justice, delivered on 29 March 2001, that it became
possible to bring this derogation to an end. Why did it take the Commission and the Court more than ten
years to denounce a situation which was a problem for no one except themselves? In particular, why was
it necessary to introduce the VAT requirement in respect of service charges just as the euro was being
introduced? The new currency will itself give rise to inflationary pressures linked to its conversion rate
(6,55957 francs to the euro) and the problems which rounding off prices will pose. Will the Commission
explain why it has accepted this absurd timing and thereby taken the risk of heightening recessionary
trends by discouraging private consumption, which is an engine of growth?

(1) OJ L 239, 16.8.1989, p. 21.
(2) OJ L 145, 13.6.1977, p. 1.

Answer given by Mr Bolkestein on behalf of the Commission

(6 November 2001)

The derogation referred to in the Honourable Member’s question which was granted to France by Council
decision of 28 July 1989 is in no way intended to enable France to exclude service charges from the VAT
assessment basis. This measure, which derogates from Article 17(6) of the Six Directive 77/388/EEC on the
harmonisation of legislation on the laws of the Member States relating to turnover taxes, authorised France
to exclude tax on certain representational expenditure from the right to deduct VAT. This derogation was
deemed to be invalid by the Court of Justice in its ruling of 19 September 2000 (1).

As guardian of the EC Treaty the Commission must ensure that Community legislation is properly
implemented by the Member States even in the transition period preceding the introduction of the euro.

C 134 E/128

Official Journal of the European Communities

EN

6.6.2002

In this case the Commission took the view that point 1 of Article 2 and Article 11(A)(1)(a) of the Directive
of 17 May 1977 meant service charges could not be excluded from the VAT assessment basis.

Furthermore, the non-inclusion of service charges in the VAT assessment basis had a negative impact on
the French contribution to VAT own resources for the Community budget as each Member State’s
contribution is calculated using that assessment basis.

These are the reasons which led the Commission to institute infringement proceedings under Article 226
(former Article 169) of the EC Treaty against France for having allowed service charges to be excluded
from their VAT assessment basis.

The Commission’s legal analysis was confirmed by the Court of Justice in a ruling of 29 March 2001 (2).

Member States are required to notify the Commission within three months of measures taken to comply
with rulings by the Court of Justice. If they do not, a procedure may be introduced under Article 228
(former Article 171) of
the EC Treaty. Since the Commission has no influence on the length of
infringement proceedings, the fact that the introduction of the euro has coincided with the alignment of
French legislation on Community law is purely fortuitous.

Joined cases C-177/99 and C-181/99 Ampafrance SA and Sanofi Synthelabo SA.

(1)
(2) Case C-404/99 Commission v France.

(2002/C 134 E/127)

WRITTEN QUESTION E-2858/01

by Mary Banotti (PPE-DE) to the Commission

(17 October 2001)

Subject: The cold-blooded murders of children and young people in Honduras

According to a United Nations expert, many hundreds of homeless children and young people are being
murdered in Honduras, many of them by the State. This is unacceptable for a country that has ratified the
UN Convention on the Rights of the Child.

What actions is the Commission going to undertake in order to stop these cold-blooded murders of
children?

(2002/C 134 E/128)

WRITTEN QUESTION E-2859/01

by Mary Banotti (PPE-DE) to the Commission

(17 October 2001)

Subject: The slaughter of children and young people in Honduras

Is the Commission aware that more than 900 children and young people A many of them homeless A
have been murdered in cold blood in Honduras in the past two and a half years? According to the UN
Special Rapporteur on extrajudicial and summary executions who was in Honduras in August of this year,
invited by Casa Alianza, an outspoken defender of street children in Central America, many of the murders
are in fact committed by the police and other State actors. Impunity is considered to be a major factor in
the continuance of these killings. What action is the Commission going to take, bearing in mind that a
recent project for street children funded by the EU was recently closed?