The VAT Directive provides for the application of a minimum 15% VAT rate throughout the EU. However, it also sets out a restricted list of goods or services on which member states have the possibility to apply a reduced rate. Moreover, certain member states are granted some derogations which allow them to apply reduced rates on other goods or services, thereby preventing a coherent EU legislation, some have argued.

The Commission is consequently seeking stakeholders' opinions and evidence on the impact that applying reduced VAT rates on different categories of goods or services has on prices, demand, employment, environment and on any factor which could distort the smooth functioning of the internal market.

The EC announced this week that the consultation is likely to be of interest to all stakeholders, in particular businesses which might face distortions in competition from companies established in member states where reduced rates are applied.

The Commission stated that it will take into account the opinions and views from the consultation in its legislative proposal planned for July 2008. Comments must be received by May 12th, 2008.