| Author (Person) | Chapman, Peter |
|---|---|
| Series Title | European Voice |
| Series Details | Vol.9, No.42, 11.12.03, p16 |
| Publication Date | 11/12/2003 |
| Content Type | News |
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By Peter Chapman Date: 11/12/03 FRANCE's gourmet restaurateurs could be the surprise victim after the European Commission bowed to pressure from EU finance ministers and MEPs not to chop tax breaks for hairdressers and other 'labour intensive services'. The Commission announced this week that it would, reluctantly, propose a two-year extension to the experimental tax scheme that it claimed had so far failed to achieve its objective - boosting jobs. But officials said ministers are now unlikely to jeopardize this victory by pushing for a deal on far more controversial proposals to streamline the hotch-potch of rules concerning value-added tax (VAT) rates across the Union. That means demands by France for the right to allow restaurants to charge lower rates could fall by the wayside. However, zero VAT on children's clothes and shoes in the UK and Ireland are set to stay. Before this week's U-turn, member states were heading for an almighty VAT clash. Germany opposed moves to water down the tax system to please sectors calling for lower VAT, such as French restaurateurs and record companies. At the same time, the UK and Ireland were under intense domestic pressure to fight to keep their own rights. But nine member states taking part in the scheme will continue to benefit from the deal on labour intensive services. The VAT initiative was due to expire at the end of the year, but finance ministers and MEPs agreed that the tax breaks should be given at least another two years to prove their worth. The scheme was launched in 1999 with the goal of boosting jobs and tax compliance in 'black economy' sectors, but the EU executive argued that the low rates had failed to make a difference. Frits Bolkestein, commissioner for the internal market, said that firms had not encouraged extra demand for their services by passing on savings to consumers. Instead, many had kept prices the same and pocketed the tax savings. The Dutchman said this scenario was backed-up by the practical experience of his wife, who told Bolkestein that she discerned few changes during her visits to the hairdressing salon since lower VAT was introduced. The Commission's U-turn means that hairdressers, small bicycle repair shops, cobblers and window cleaners are now granted a reprieve. House repairs and care services were also part of the trial but the Commission wanted to grant lower VAT rates to these sectors under the Union's main 'Annex H' regime. The European Commission decided on 10 December 2003 to propose to allow nine Member States to continue to apply for an additional two years (i.e. until 31 December 2005) the reduced rates of Value Added Tax (VAT) they currently apply to specified labour-intensive services such as renovation of private dwellings, hairdressing, window-cleaning and small repairs. Demands by France for the right to allow restaurants to charge lower rates may not now be realised. |
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| Subject Categories | Taxation |
