04/11 2008 ESBA on Reduced VAT Rates

Brussels, 4 November 2008

ESBA CALLS ON EU FINANCE MINISTERS TO ACCEPT THE PROPOSAL ON VAT REDUCED RATES

On 4 November, EU finance ministers will discuss the Commission proposal to revise the common system of value added tax in the European Union. Under the new system Member States would be given the possibility to apply reduced VAT rates of not less than 5% in a large number of labour-intensive sectors on a permanent basis. The proposal on VAT reduced rates, presented this July, is one of the actions proposed in the Small Business Act for Europe. ESBA supports the Commission’s initiative as a good step towards the normalisation of the currently distorted tax regime and urges all Member States to pull together on this very important issue.

The new legislation aims to introduce changes to the current tax system, enabling all Member States to apply reduced VAT rates to local and labour-intensive businesses (e.g. restaurants). Other categories would include cleaning and maintenance services, care services and personal-care services, such as hairdressing and gardening. The proposal contains also important changes for the construction sector, in which the reduced VAT would no longer be limited to social housing but could also be applied to the supply and construction of all housing and related services.

All sectors concerned are dominated by small and medium size enterprises. ESBA believes that the proposed revision would have a major impact on the SME sector, enabling local businesses to improve their economic performance significantly. ESBA also considers that VAT on ‘green’ goods and services could be cut to promote their production and consumption. ESBA urges the European Commission and the Member States to give back autonomy to the national level to apply reduced VAT rates.

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Notes to the editor:

ESBA is a non-party political European group, which gathers member organisations from 22 European countries. It currently represents over 1 million small business entrepreneurs and is one of the largest organisations based on voluntary membership in Europe. ESBA cares for small business entrepreneurs and the self-employed and represents them through targeted EU advocacy activities. It also works towards the development of strong independent advocacy and benefits groups in European countries. For more information, please contact: secretariat@esba-europe.org or visit: www.esba-europe.org

Commission’s proposal for a Council Directive amending Directive 2006/112/EC as regards reduced rates of value added tax can be found here: http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/COM(2008)428_en.pdf

Small Business Act for Europe can be found here: http://ec.europa.eu/enterprise/entrepreneurship/docs/sba/COM_2008_394_SBA.pdf

ESBA - The Independant Voice for Small Business