WRITTEN QUESTION E-2688/03 by Toine Manders (ELDR) to the Commission. Reduction in VAT rates for labour-intensive sectors.
Date: 2003-09-10
Institutions: European Parliament, Provisional data
Subjects: Netherlands, VAT, VAT rate, economic analysis, job creation, provision of services, tax harmonisation, tax relief

3.4.2004

EN

Official Journal of the European Union

C 84 E/217

As for Turkmenistan, the EU made a declaration on 20 January 2003 (5462/03) calling upon the President
and the Government of Turkmenistan fully to cooperate with the process launched in the framework of
the OSCE under the mechanism agreed at the 1991 Moscow meeting of the conference on the human
dimension.

All of the abovementioned documents are publicly available on the internet.

(1) OJ L 239, 9.9.1999.
(2) OJ L 246, 17.9.1999.
(3) OJ L 205, 4.8.1999.
(4) OJ L 196, 28.7.1999.
(5) OJ L 327, 28.11.1997.
(6) OJ L 229, 31.8.1999.

(2004/C 84 E/0261)

WRITTEN QUESTION E-2688/03

by Toine Manders (ELDR) to the Commission

(10 September 2003)

Subject: Reduction in VAT rates for labour-intensive sectors

During the period 1 January 2000 to 31 December 2003 the European Commission reduced VAT in a
number of sectors to 6 %, by way of an experiment. In the Netherlands, this applied to hairdressers,
painters and plasterers of housing over 15 years old, bicycle repair services and shoe and clothing repair
services. The aim of the reduction in VAT was to increase employment.

The experiment with a lower rate of VAT on labour-intensive services proved a success. A study by the
Central Planning Office (CPB) based on Netherlands statistics shows that the reduction in the VAT rate
clearly had a positive effect on employment. The report speaks of a ‘significant impact on employment’.
For example, employment (full-time equivalent) rose by 14,5 % in the hairdressing sector during the period
1999 to 2002, compared with a total average rise in employment during this period in the Netherlands of
only 4 %.

Despite this, the Commission announced on 16 July that it did not intend to continue with the experiment
involving reduced VAT on labour-intensive services.

Does the Commission recognise the importance of the aforementioned labour-intensive sectors for

1.
employment and the economy in the Netherlands?

Is the Commission aware of the positive effects on employment resulting from the reduction in the

2.
VAT rate for the above-mentioned labour-intensive services in the Netherlands?

Does the Commission agree that its conclusions are based on a possibly incomplete and one-sided

3.
analysis of the effects of the experiments to date? If not, why not?

Does the Commission intend to reconsider its decision to end the experiment involving a low VAT

4.
rate on labour-intensive services, taking account of the current economic situation? If not, why not?

Answer given by Mr Bolkestein on behalf of the Commission

(20 October 2003)

On 23 July 2003 the Commission adopted a proposal for a Directive on reduced rates of VAT (1).
1.
Since the Commission’s aim was to improve the operation of the internal market it was important to give
all Member States the same rights in deciding whether they applied reduced rates, and for the same sectors.

C 84 E/218

Official Journal of the European Union

EN

3.4.2004

The proposal for a Directive does not provide for reduced rates for labour-intensive services as such. In its
evaluation report on the experiment with reduced rates for such services (2), the Commission concluded
that, from the information supplied by the Member States and given the limitations of the methods of
analysis used, it was not possible to find solid evidence of such reductions either boosting job creation or
having an impact on the black economy.

For the purposes of this report the Commission used its QUEST macro-economic model to carry out a an
analysis of the effects of a reduced rate of VAT compared with the effects of reduced labour charges. The
results showed that even in the most favourable hypothesis, namely that the entire reduction of VAT rates
was passed on in domestic prices, a reduction in charges on labour creates 52 % more jobs, calculated for
the EU as a whole, for the same budgetary cost.

However, it should be noted that some sectors currently covered by the experiment (work on private
housing and home care services) have been included in Annex H because many Member States already
apply reduced rates or exemptions for these services under specific derogations which they have been
granted. This is not the case for small repairs and hairdressing, since only a minority of Member States
currently apply reduced rates to those services.

The Commission has indeed seen the Centraal Planbureau study sent to it by the Netherlands
2. and 3.
Government. Although the Netherlands report did not reach the Commission until after the evaluation
report was adopted, it did not alter the general trend which had emerged from the reports received from
the Member States participating in the experiment and all
the other information available to the
Commission when it drew up its report.

4.
The Commission proposal of 23 July 2003 is currently being examined by the Council. It will be up
to the Council to decide, on a unanimous basis and in the light of Parliament’s opinion, the future scope of
reduced rates of VAT.

(1) COM(2003) 397 final.
(2) COM(2003) 309 final.

(2004/C 84 E/0262)

WRITTEN QUESTION E-2837/03

by Alexandros Alavanos (GUE/NGL) to the Commission

Subject: Creation of a new airline from Olympic Airways

(25 September 2003)

The Hellenic Parliament recently adopted a law regulating the form and operation of a new airline,
Olympic Airlines, derived from Olympic Airways.

Article 11 of the new law annuls the collective labour agreements and procedures for reaching agreement
concluded with the trade unions, following their termination by the Board of Olympic Airways and
Olympic Aviation, while paragraphs 4 and 5 of Article 9 of Law 1876/1990, which govern the period of
validity of collective labour agreements, have ceased to apply.

Given that these developments constitute a change in industrial relations to the detriment of the workforce
during the transfer to the new company, will the Commission say:

1. whether

the annulment of articles of Law 1876/1990 governing compliance with collective
agreements and procedures for reaching agreement (an article of the new law) is consistent with
Articles 3 and 4 of Directive 98/50/EC (1) relating to the safeguarding of employees’ rights in the event
of transfers of undertakings, and

2. whether, in the event of non-compliance with the articles of Directive 98/50/EC, the Commission will
intervene, and in what manner, to safeguard the rights of the workers who are being transferred to the
new company and the rights of those remaining with the old company?

(1) OJ L 201, 17.7.1998, p. 88.