VAT ON POSTAL SERVICES (9060/03, 11388/04)
Letter from Dawn Primarolo MP, Paymaster
General, HM Treasury to the Chairman
I am writing to let you know the current status
of this European Commission Proposal,as Cabinet Office have noted
that it is some two years since I last did so.[16]
You will be aware that in 2003 the Commission
proposed the removal of the exemption for services provided by
the "public postal services" (Royal Mail in the UK),
and that a reduced rate of no less than 5% be made available for
certain letterbox services, regardless of provider. In the EM
11388/04 COM (2004) 468 (10 August 2004) and my previous letters
to you on this proposal, I have made clear that the Government
is opposed to VAT on stamps—and therefore to the Commission
proposal as it stands, and that we would make this clear in any
negotiations on this proposal.
While there were Council Working Groups to discuss
this Proposal in 2004, there was no consensus or agreement among
Member States and there has been no move from successive EU Presidencies
to continue discussions since that time. Negotiations on the Proposal
remain stalled for the moment. There are no indications that time
will be found for it either under the current Finnish Presidency
or that of the Germans, which follows early next year.
However, the Commission has also 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. We are confident that the UK's current application
of exemption to all postal services provided by the public postal
service is correct in law, and have replied to the Commission
to this effect.
You may also wish to be aware that there has
been 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. We have yet to receive a date on when this application
will be heard.
Meanwhile, the Government remains in regular
contact with stakeholders, including postal operators and the
independent regulator (Postcomm), to assess any interaction between
the VAT rules and the development of competition and the continued
delivery of the universal postal service.
25 October 2006
Letter from the Chairman to Rt Hon Dawn
Primarolo MP
Thank you for your letter dated 25 October regarding
EM 9060/03. This was considered by Sub-Committee A at their meeting
of 7 November. The Committee have previously cleared this document
from scrutiny, but decided to continue to hold under scrutiny
the amended proposal outlined in EM 11338/04.
The Committee continues to support the Government's
opposition to removing the current exemption from VAT for public
postal services. The Committee would like to be kept informed
as to future progress in the negotiations on the outcome of the
Commission's enquiry into the scope of the present exemption,
and on the progress and outcome of the judicial review requested
on VAT issues.
16 November 2006
16 Correspondence with Ministers, 10th Report of Session
2003-04, HP Paper 71, pp 40-44. Back
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