EU ministers reach agreement on VAT flexibility
Posted, March 10, 2009 @ 19:00
Conservatives support greater freedom over tax policy Finance ministers have reached a welcome agreement on plans that would give national governments greater freedom to reduce VAT on locally-provided and labour-intensive services.
Last month, the European Parliament backed the directive which 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:
"Governments should have more flexibility in setting VAT rates in services that cannot be traded across borders.
"The blanket two and a half percent VAT cut in the UK was not only unaffordable but also largely ineffective. By taking advantage of this proposal, national governments will be able to target VAT cuts at specific sectors where they may have a more tangible benefit.
"Targeted VAT reductions will be far more affordable and effective than the government's current across-the-board cut.
"Germany should be congratulated for dropping its opposition to this proposal. National governments will be free to decide if and how they take advantage of this new flexibility according to their local economic circumstances."