10 Value added tax
| (a)
(25571)
8751/04
COM(04) 296
(b)
(25572)
8754/04
COM(04) 295
|
Draft Council Decision authorising the Czech Republic and Poland to apply a reduced rate of VAT to certain labour-intensive services in accordance with Article 28(6) and (7) of Directive 77/388/EC
Draft Council Directive amending Directive 77/388/EC by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia
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| Legal base | (a) —
(b) Article 57 (1) Act of Accession, —; QMV
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| Document originated | (Both) 21 April 2004
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| Deposited in Parliament | (Both) 27 April 2004
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| Department | Customs and Excise
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| Basis of consideration | EM of 12 May 2004
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
10.1 Directive 77/388/EEC, the 6th VAT Directive, as
variously amended, sets the general framework for the application
of VAT in the Community. It provides for the possibility of various
derogations to meet particular needs, collective or individual,
of Member States. Directive 1999/85/EC amended the 6th
VAT Directive to allow an experimental reduced VAT rate on certain
labour-intensive services. The period for the experiment has been
extended twice and it is now due to end on 31 December 2005.
The documents
10.2 The pre-accession negotiations for the new Member States
did not deal with the possibility of a reduced rate of VAT on
labour-intensive services in those countries as the experiment
was then due to expire before accession. But given the extension
of the experiment to the end of 2005 and that nine of the new
Member States currently apply a reduced rate of VAT on labour-intensive
services, the Commission proposes that the 6th VAT
Directive be amended to allow the new Member States to benefit
from the experimental provision if they so wish. The draft Directive
in document (b) would make the necessary amendments.
10.3 Poland and the Czech Republic have already said
that they would wish to apply a reduced rate of VAT to small repairs
to bicycles, shoes and leather goods and clothing and household
linen (Poland) and window cleaning, house cleaning and domestic
care services (Czech Republic). The draft decision in document
(a) would authorise them to do so.
The Government's view
10.4 The Paymaster General (Dawn Primarolo) says:
"The Government has not previously opposed the
experimental reduced rate scheme, or its application by other
Member States, given that the reduced rates involved had no impact
on the UK. It would therefore have no objection in principle to
the applications from the Czech Republic and Poland.
"However, the Government does have concerns
whether the QMV legal base for the proposed Council Directive,
Article 57 of the Accession Treaty, is appropriate. This provides
a fast-track procedure for adaptation of existing EU legislation
where such adaptation is required 'by reason of accession', and
which was not adapted in the Accession Act itself. The Government
considers that in principle legislation concerning tax should
be made by unanimity."
Conclusion
10.5 We do not normally draw the attention of
the House specifically to this sort of proposal in relation to
the operation of the 6th Vat Directive. But we do so
on this occasion given the Minister's comment on the legal base
for the draft Directive.
10.6 We clear the documents but urge the Government
to satisfy itself that use of Article 57 of the Accession Treaty
does not compromise the principle of unanimity in relation to
taxation matters and, if it does so compromise the principle,
to oppose progress on the draft legislation.
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