EU Ministers Remain Deadlocked On VAT Harmonisation

by Ulrika Lomas, Tax-News.com, Brussels

17 September 2003

European Union Finance Ministers failed to reach an agreement concerning VAT harmonisation during an informal meeting in Stresa, Italy recently meaning that the issue will now be placed on the agenda at the upcoming Inter-Governmental Conference next month.

As part of its ongoing attempt to simplify the pan-EU VAT system, last July the Commission drew up a list of goods and services to which reduced rates of VAT should apply. However, much to the chagrin of the UK and Ireland, this list did not contain children's clothes and shoes and the proposal was apparently dismissed by the British government as being "socially regressive".

“It has become clear that Ministers' views vary widely," commented Internal Market Commissioner Frits Bolkestein. "Some Ministers consider that the Commission's proposal is too generous in terms of allowing reduced rates to continue. Other Ministers consider that the Commission's proposal is too strict and that more reduced rates should be allowed. Still other Ministers think that the Commission has struck the right balance.”

Bolkestein was confident that an agreement will be reached in the coming months and stressed that the negotiations are at an early stage "I am hopeful that we reach a satisfactory outcome by the end of this year, when the temporary reduced rates on labour intensive services will come to an end,” said the Commissioner.

Recommended