WRITTEN QUESTION P-3376/03 by Christine De Veyrac (PPE-DE) to the Commission. Reduced rates of VAT — hairdressing.
Date: 2003-11-10
Institutions: European Parliament, Provisional data
Subjects: VAT rate, economic analysis, hairdressing and beauty care, tax harmonisation, tax incentive

27.3.2004

EN

Official Journal of the European Union

C 78 E/533

Answer given by Mr Prodi on behalf of the Commission

(23 December 2003)

Article IV(2) of the draft Constitution provides for the repeal of the EC and EU Treaties, including all the
protocols attached to those Treaties.

Accordingly, when the Constitution enters into force, all the protocols in question will be repealed.

The Presidency of the Intergovernmental Conference has instructed a group of legal experts from the
delegations, under the chairmanship of Mr Piris, an IGC juris consult, to check the legality of the draft
Treaty establishing a Constitution for Europe drawn up by the Convention. The exercise also involved
looking into the matter of which protocols attached to the EU or EC Treaty should be included or adapted.
The result of this work has been submitted to the Conference (doc. IGC 50/03-ADD 1); if the Conference
endorses the result, the protocols in question, revised by that group, will be attached to the Treaty
establishing a Constitution for Europe.

(2004/C 78 E/0555)

WRITTEN QUESTION P-3376/03

by Christine De Veyrac (PPE-DE) to the Commission

(10 November 2003)

Subject: Reduced rates of VAT (cid:1) hairdressing

Since 1999, on a trial basis, the European Union has authorised the application of reduced rates of VAT to
‘highly labour-intensive services’. An exhaustive list of eligible sectors was drawn up. Three EU Member
States (Spain, Luxembourg and the Netherlands) decided to apply the lower rate in the hairdressing sector
and would now seem to be willing to continue the experiment. However, in its most recent proposal for a
directive concerning VAT the Commission proposes that hairdressing should be removed from the list of
services eligible for a reduced rate. That measure is based on a study carried out by the Commission which
concludes that the reduced rate has had no favourable impact on employment and that its impact on
prices is unclear.

The Commission’s standpoint is regrettable in that the conclusions of the study reflect statistics drawn up
over only two or three years, depending on the country concerned. Such an assessment would seem to be
far from adequate as the basis for a definitive economic judgment.

In the light of the above, can the Commission state whether it regards two (or three) years’ statistics as
sufficient to assess the economic effectiveness of a tax measure and whether, accordingly, it would not
make sense to continue the current experiment by retaining hairdressing on the list of ‘highly labour-
intensive services’ eligible for reduced rates of VAT?

Answer given by Mr Bolkestein on behalf of the Commission

(4 December 2003)

The reduced rate of VAT for hairdressing was introduced by Directive 1999/85/EEC of 22 October 1999
which allows a reduced VAT rate to be applied on an experimental basis to labour-intensive services (1).
This experiment was introduced for a specific period and evaluation reports have to be presented by both
the Member States taking part in the experiment and the Commission.

The Commission adopted its evaluation report on 2 June 2003 (2). This concluded that in the view of
‘information supplied by Member States and the inherent limitation of analytical methods applied, it was
not possible to find solid evidence of such reductions in VAT boosting job creation. For the effect on the
reduction on the black economy the same observation can be made’.

C 78 E/534

Official Journal of the European Union

EN

27.3.2004

Under this evaluation exercise the Commission carried out a comparative analysis using its macroeconomic
QUEST model, of the effects of reducing VAT rates and the impact on labour costs. This exercise showed
that, even under the best assumption that the reduction of VAT rates would be passed on in full to
domestic prices, a reduction in labour costs would create 52 % extra jobs within the European Union at
the same cost to the budget.

The evaluation period was originally set by the Council at three years (and then extended for one year) and
is sufficiently long to determine whether the anticipated economic mechanism (reduction in prices,
increase in demand and ultimate increase in jobs) works correctly. One of the important lessons learned
from this experiment is that, in many cases, the reduction in VAT rates is not passed on, or if it is, only
partially, in the selling price to the final consumer. If it is passed on, it is usually only temporarily and
there is a catching-up effect in the sectors concerned (prices rise more than the rate of inflation). It is
therefore concluded that the economic mechanism does not work as had been anticipated and the impact
on employment is often unpredictable, even in the longer term.

for a Directive on reduced rates (3). As the
On 23 July 2003 the Commission adopted a proposal
Commission’s objective is to improve the functioning of the internal market it is essential that all Member
States are able to apply reduced rates if they wish in the same sectors. The proposal does not include
reduced rates for hairdressing services.

The proposal
Parliament’s opinion, on the future scope of reduced VAT rates.

is being examined by the Council. It has to decide by unanimity, and in the light of

(1) Council Directive 1999/85/EC of 22 October 1999 amending Directive 77/388/EEC as regards the possibility of

applying on an experimental basis a reduced VAT rate on labour-intensive services, OJ L 277, 28.10.1999).

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

(2004/C 78 E/0556)

WRITTEN QUESTION E-3379/03

by Mihail Papayannakis (GUE/NGL) to the Commission

(14 November 2003)

Subject: Expansion of petroleum installations in the Ambracian Gulf

Local citizens have complained that plans are going ahead to expand the petroleum installations in the
Ambracian Gulf. This marine environment with its rare ecosystem is one of the most important wetlands
in Greece, and for this reason part of it is protected under the international Ramsar Convention as a
Special Protection Area.

Given that the Ambracian Gulf forms part of the Natura 2000 Network drawn up as part of the
implementation of Directive 92/43/EEC (1), what does the Commission intend to do to ensure the
preservation of the rare biodiversity (flora and fauna) in the region as a whole and to avert any threat to
human health? As co-funder (under the third CSF) of many environmental protection projects in the region
over the last decade (biological purification plants), does the Commission intend to examine whether the
impact of such an entrepreneurial activity on the ecosystem has been adequately studied and assessed?

(1) OJ L 206, 22.7.1992, p. 7.

Answer given by Mrs Wallström on behalf of the Commission

(19 December 2003)

The Amvrakikos Gulf (Ambracian Gulf) has been designated a special protection area (GR2110004) under
Council Directive 79/409/EEC of 2 April 1979 on the conservation of wild birds (1) and has been proposed
by the Greek authorities as a site of Community importance (GR2110001) under Council Directive 92/43/