According to Members, this measure can have positive effects in terms of job creation and the fight against the underground economy.
The report, drafted by Ieke van den Burg (PES, NL) supports the Commission plans to extend in time and scope the existing range of goods and services on which Member States may apply reduced rates of VAT.
Option to reduce VAT on restaurant services...
On an experimental basis, Member States were allowed to apply lower rates on certain labour intensive services. This experiment runs to 2010. The Commission is now proposing that this possibility should continue indefinitely and also incorporate some additional labour-intensive or locally supplied services where there is no risk of distorting the single market - and this would now include:
- restaurant services,
- domestic care services for the young, sick, disabled or elderly and
- beauty treatments of the sort provided in hairdressing salons
MEPs confirmed the view previously expressed by Parliament that reducing VAT of locally supplied services does not alter competition in the EU Internal Market since the concerned goods and services cannot be supplied from a different location and are only directed to a local market.
...and audio books
In addition, a number of updates and additions are proposed to the other categories where reduced rates of VAT are permitted. This notably includes making audio books or books supplied on CD-Rom eligible for reduced rates (printed books are already included) as well as children's car seats.
No reduced VAT on alcohol
Finally, an amendment to extend the possibility to reduce VAT rates also to alcoholic drinks served in restaurants has been rejected by 334 votes against, 312 in favour and 13 abstentions.
As usual with taxation issues, Parliament's views are advisory rather than binding and the final decision is for the Council, acting unanimously.
