MEPs vote for more VAT flexibility
Posted, February 19, 2009 @ 18:00
Governments should have greater freedom over tax policy
The European Parliament has adopted proposals today that would renew the facility which allows governments more flexibility to set VAT rates on locally-provided and labour-intensive services. Regrettably the UK Government has never taken advantage of this.
The directive allows governments to reduce the rate of VAT to five percent on services that are local and are unlikely to be provided remotely or across borders such as building renovations, cleaning, hairdressing, restaurants and gardening. Being labour-intensive, they can help mitigate the current serious unemployment trends.
Conservative vice chairman of the parliament's Economic and Monetary Affairs committee, John Purvis MEP, says that EU member states should take advantage of this flexibility to set their taxation rates in these areas.
Mr Purvis said:
"The blanket two and a half per cent VAT cut in the UK has been largely ineffective in stimulating our economy, but governments should use the freedom to decide if a targeted VAT cut is the best option for their economies.
"In the current parlous state of the British, European and World economies, this proposal gives EU member states an opportunity to work in concert to target major reductions in VAT, down to five per cent, on labour-intensive and local services such as renovation of homes, places of worship and of cultural importance. This will be much more effective than the across-the-board reduction of two and a half per cent.
"The Council of Ministers should now speedily approve these plans so that governments have greater flexibility in applying VAT rates."