6 Value added tax on postal services
| (25812)
11338/04
COM(04) 468
| Amended draft Directive amending Directive 77/388/EEC as regards value added tax on services provided in the postal sector
|
| Legal base | Article 93 EC; consultation; unanimity
|
| Department | HM Treasury |
| Basis of consideration | Minister's letter of 25 October 2006
|
| Previous Committee Report | HC 42-xxx (2003-04), para 2 (9 September 2004)
|
| To be discussed in Council | Not known
|
| Committee's assessment | Politically important
|
| Committee's decision | Not cleared, further information awaited
|
Background
6.1 Directive 77/388/EEC, the Sixth VAT Directive, provides that
supplies made by "public postal services" are exempt
from value added tax (VAT), as are supplies of postage stamps
sold at face value for use for postal services. The present VAT
rules mean that the postal services of the Royal Mail, as the
public postal service provider, are exempt (except for post to
or from destinations outside the Community, which is zero-rated).
VAT is chargeable on services provided by other postal operators.
6.2 In May 2003 the Commission presented a draft Directive to
amend the Sixth VAT Directive as it relates to postal services.
In July 2004 the Commission presented this amended draft Directive,
taking into account four, out of 12, amendments proposed by the
European Parliament. The amended draft Directive would:
- remove the VAT exemption for public postal services and postage
stamps;
- allow an optional reduced rate, of not less than 5%, of VAT
for postal services (excluding express services) relating to addressed
letters and packets no heavier than ten kilograms. This would
let Member States, if they so choose, mitigate the impact on prices
of removing the existing exemption;
- amend place of supply and VAT liability rules for postal services
(excluding express services) relating to addressed letters and
packages no heavier than ten kilograms and destined for countries
outside the Community. Ten kilograms is suggested as a natural
weight borderline which is already established within the postal
sector in connection with Member States' responsibilities to ensure
the provision of a universal postal service;
- allow Member States to have a special tax accounting scheme
for postal operators. Such schemes would address potential control
and accounting difficulties for postal operators providing, under
the Commission's proposal, a combination of services subject to
standard, reduced and zero VAT rates;
- provide for taxation of terminal dues -
that is, payments received by postal operators, as sub-contractors,
for delivery of items received from a postal operator outside
the Member State concerned; and
- require Member States to implement
any new Directive by 1 January 2007 — the (extended) deadline
was to recognise that postal operators would need time to adapt
their systems to enable them to implement any VAT changes.
6.3 In September 2004 the previous Committee cleared
the original proposal, since it had been overtaken, but did not
clear the amended draft Directive. In keeping the proposal under
scrutiny it noted that the Government had told it that:
"The amendments to the proposal do not alter
the fact that the Commission proposal would impose VAT on postal
services. The Government is opposed to VAT on stamps, and will
continue to make this clear in negotiations on the proposal,"
and that:
"The Government will continue to maintain
its present regular, flexible and open-ended dialogue with affected
parties, including postal operators, customers and the postal
regulator."
The Committee said that the proposal would stay under
scrutiny pending receipt of information on:
- developments in any negotiations
that might take place; and
- the outcome of any continuing
or formal consultations.[20]
The Minister's letter
6.4 The Paymaster General (Dawn Primarolo) writes
now to tell us that, although there were Working Group discussions
of the proposal in 2004, there was no agreement among Member States
and there has been no move from successive Presidencies to continue
discussions since that time. She says negotiations remain stalled
and there are no indications that time will be found for discussion
either under the current Finnish Presidency or that of Germany
in the first half of 2007.
6.5 But the Minister adds that the Commission has
recently written separately to the UK, Sweden and Germany about
the scope of the present mandatory exemption for supplies made
by the public postal services, in particular the exemption for
services other than those necessary for the discharge of the universal
service obligation, or where special terms and conditions are
offered to customers. She says that the Government is confident
that its current application of exemption to all postal services
provided by the public postal service is correct in law and has
replied to the Commission to this effect. The Minister also draws
our attention to a request for a judicial review by a domestic
mail operator in relation to a number of VAT issues, including
the scope of the exemption. The Government has yet to receive
a date on when this application will be heard.
6.6 Finally, the Minister takes the opportunity to
reiterate that the Government is
opposed to VAT on stamps
— and therefore to the Commission proposal as redrafted,
and to say that the Government remains in regular contact with
interested parties, including postal operators and the postal
regulator about interaction between VAT rules, development of
competition and continued delivery of the universal postal service.
Conclusion
6.7 We are grateful for the Minister's account
of where matters now stand on this issue, particularly the lack
of progress on the amended draft Directive. However we note that
the Commission has not withdrawn the proposal and therefore keep
the document uncleared and under scrutiny.
6.8 We should be grateful if the Minister would
keep us informed as to developments on the draft Directive and
also, in so far as they relate to the Commission proposal, on
the Commission's enquiry about the scope of the present exemption
and on the judicial review requested on VAT issues.
20 See headnote. Back
|
