MINIMUM RATE OF VAT
(21649)
11624/00
COM(00) 537
|
Proposed amendment to Directive 77/388/EEC on the common system
of value added tax in respect of the duration of the minimum standard
rate.
|
| Legal base:
| Article 93 EC; consultation; unanimity
|
| |
| Document originated:
| 20 September 2000 |
| Forwarded to the Council:
| 20 September 2000 |
| Deposited in Parliament:
| 11 October 2000 |
| Department: |
HM Customs and Excise |
| Basis of consideration:
| EM of 11 October 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| December 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared |
Background
28.1 On 12 July 2000, we reported[62]
on a Commission Communication on a strategy to improve the operation
of the transitional VAT system. That Communication set out a strategy
for improving the transitional VAT system over the next five years.
The Commission argues that, during this period, it is important
to prevent any diversions in the standard rates of VAT applied
by the Member States as this could result in structural imbalances
in the EU and distortions of competition in certain trade sectors.
Under the Sixth VAT Directive, Member States must apply a minimum
standard rate of VAT of 15%. This provision was initially introduced
in January 1993 and has been extended on several occasions since
then. In 1999 the minimum standard rate was renewed until 31 December
2000. In the absence of any agreement by then, the current minimum
standard rate will lapse and Member States will be free, subject
to general Treaty principles, to set whatever rate they wish.
At present, the 15% rate is applied in one Member State (Luxembourg);
the highest rate (25%) is applied in two Member States (Denmark
and Sweden).
The document
28.2 The Commission now proposes that the standard
minimum rate of VAT should be maintained at 15% for the period
1 January 2001 to 31 December 2005.
The Government's view
28.3 In her Explanatory Memorandum dated 11 October
2000, the Paymaster-General (Dawn Primarolo) says that the Government
accepts that there must be a minimum standard rate of VAT set
at Community level in order to avoid risk of competitive downbidding
of rates which could cause distortions to cross-border trade.
She notes that the Commission's proposal simply rolls over for
a further five years the existing minimum rate and that no Member
State will be required to alter its standard rate as a consequence.
She says that the proposal has no practical implications for the
UK since the Government has no plans to change the current standard
rate of VAT.
Conclusion
28.4 We note that this proposal is likely
to be discussed at ECOFIN before the end of the year. We are glad
to see that the Commission has not revived its attempts to set
a ceiling as well as a floor on the standard rate. We note the
Government's support for the proposal and have no comments. We
clear the document accordingly.
62 (21355) 9337/00; see HC 23-xxiv (1999-2000), paragraph
11. Back
| 
