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Member states should be allowed to reduce VAT rates on a new series of goods and services, MEPs have agreed.
This measure was accepted with the proviso that there is no distortion of competition in the EU internal market, in the belief that it could have positive effects in terms of job creation and the fight against the underground economy
It supports the EC’s plans to extend in time and scope the existing range of goods and services on which member states may apply reduced rates of VAT. The countries are currently allowed – on an experimental basis until 2010 – to apply lower rates on certain labour-intensive services.
The commission is now proposing that this possibility should continue indefinitely and also incorporate additional services where there is no risk of distorting the single market.
MEPs confirmed the view previously expressed by the parliament that reducing VAT of locally supplied services – such as beauty treatments, restaurants and domestic care - does not alter competition in the EU internal market because they cannot be provided from a different location and are only available to a limited area.
A number of updates and additions have also been proposed for other categories in which reduced rates of VAT are eligible, including audio books and children’s car seats.
Finally, an amendment to extend the possibility to reduce VAT rates to alcoholic drinks served in restaurants was rejected.
As usual with taxation issues, the European parliament's views are advisory rather than binding, and the final decision is for the council, acting unanimously.
