Reduced rates of value added tax (debate) 
President
The next item is the report by Mrs van den Burg on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a Council directive amending Directive 2006/112/EC as regards reduced rates of value added tax - C6-0299/2008 -.
Ieke van den Burg
rapporteur. - (NL) This report on reduced VAT rates has been on quite a journey. In actual fact, there is no report left, because the two other big groups, the Group of the European People's Party (Christian Democrats) and European Democrats and the Group of the Alliance of Liberals and Democrats for Europe, failed to show up to the vote on my report in the Committee on Economic and Monetary Affairs and, without any warning, voted against beforehand because they did not like the rejection or adoption of one amendment or another.
By doing so, they have put the support for this important Commission proposal at serious risk. I regret this deeply because it has created completely the wrong impression about the European Parliament's position. Fortunately, they have backtracked and have now indicated that the Commission's proposal can count on their full support. We agreed that we would no longer bicker about these amendments during the plenary, but would instead accept Commissioner Kovács' proposal with a resounding 'yes'.
Unfortunately, Mrs Lulling nevertheless laboured under the misapprehension that she had to retable her rejected amendments, even though this is not really consistent with the text of the legislative resolution or the procedure we are following. There is apparently here in this Parliament a variation on the Latin saying Quod licet Iovi, non licet bovi, what is legitimate for Mrs Lulling, is not legitimate for an ordinary MEP. Without taking anything away from her divine status, I would urge you not to be distracted by this and to vote emphatically in favour of the legislative resolution during the roll-call vote at the end. This is what this is all about, after all. Together with the Commissioner, I count on your support and I assume that Mrs Lulling will realise that if she withholds her support from this resolution because things have not gone her way, she will be much worse off and will create the wrong impression that she is opposed to a reduced VAT rate.
This Parliament, and I am very proud of this, has a long tradition of supporting proposals for applying a reduced VAT rate for labour-intensive services. What is more, this Parliament has taken it upon itself, on the initiative of one of my predecessors, Mr van Velzen, during the employment summit in Luxembourg in 1997, to launch the proposal to use this low VAT rate as an incentive for employment by making these services cheaper, increasing the volume, and also by bridging the gap between illegal and legal working. This employment target is, to my mind, very important again at this point in time. It is my firm belief that the experiment has proven its effect beyond any doubt.
The previous Commissioner, Mr Bolkestein, was less convinced and was, like a number of Member States, sceptical. He did not want to use employment as a target for tax policy. He took the view that tax policy was not intended for this purpose. Fortunately, the present Commissioner realises that this should be seen in a wider context, and I am delighted that he is now giving this experiment a structural dimension.
I would like to add a brief comment about the current situation. In all honesty, I cannot imagine the Council, in the current situation, not giving its unanimous support to this proposal. After all, it is keen to do something about this tragic job situation and the recovery of the European economy. Tax measures, including a reduction in VAT, for example, in the building and renovation industry, in making homes and our cultural heritage more energy-efficient, and all kinds of other things, could give an incentive to the housing market, which is now very much at a stalemate.
At the risk of labouring the obvious, it is not the amendment tabled by the PPE-DE Group within the Committee on the Internal Market and Consumer Protection that puts the stress on energy efficiency. This was already in the Commission proposal. It was deleted in Amendment 6 and re-introduced in Amendment 7. This can only create confusion. It is, however, clear that Parliament is very much in favour of energy efficiency. We therefore hope that the Council will embrace the proposal by Commissioner Kovács and that this important vote today does not degenerate into internal squabbling.
László Kovács
Member of the Commission. - Madam President, I want to thank the European Parliament for its quick handling of this proposal, in the light of the request by the European Council of last December in the context of the European Economic Recovery Plan to settle the issue of reduced VAT rates in certain sectors by March 2009.
I am pleased that the Committee on Economic and Monetary Affairs (ECON) has adopted a draft resolution approving the Commission's initiative, and I hope that the plenary will take the same supportive line.
I would like to thank the ECON Committee and the rapporteur, Ms van den Burg, for their support. Indeed, the quick adoption of this proposal is necessary in order to give certainty about the application of reduced rates to certain locally supplied, labour-intensive services that would otherwise have to disappear at the end of 2010. Moreover, it is important to ensure equal possibilities for all Member States in sectors such as housing and restaurants, because in these sectors Member States are currently not on an equal footing.
The current economic and financial crisis adds to the urgency of adopting and implementing this proposal. It is not the moment to destroy jobs, which would be the case if the reduced rates currently applied in 18 Member States for labour--intensive services were not made definitive. Moreover, it is important to make these reduced rates rapidly available to all Member States. By incentivising consumer spending in areas such as the housing sector, reduced rates can have positive effects on employment, in particular amongst the category of low-skilled workers, who are precisely those who risk being laid off first in the current crisis. In this context, I have already recommended to the Council to modify the proposed date of entry into force of the directive, in order to allow its application as quickly as possible after a positive decision is taken by the Council.
In the Council, the Czech Presidency is currently concentrating all its efforts on achieving a compromise concentrating on a limited number of sectors - labour-intensive, locally supplied services - to which reduced rates should be made available, as required by the European Council.
However, I have some comments on the amendments that have been tabled to this specific and limited proposal.
On Amendment 3: on the exclusion of alcoholic beverages from the restaurant services, the Commission respected the coherence of Community policies, in particular the need for coherence between VAT and excise duties, but also considering the global health policy of the EU. Contrary to some concerns, differentiating between food and non-alcoholic beverages, on the one hand, and alcoholic beverages, on the other hand, does not create a serious administrative burden for businesses. Indeed, currently, seven out of the 11 Member States applying reduced rates to restaurant services exclude alcoholic beverages without any difficulty.
On Amendment 2: as for the proposed extension of the scope of reduced VAT rates to machinery used by farmers, I consider this to be unnecessary. This is because the VAT charged on equipment serving as input for the agricultural sector is not a cost to farmers because they have the right to deduct this VAT, like any other taxable person.
On Amendments 1 and 4: concerning the amendments related to the addition of children's clothes and footwear, I would like to remind you that the proposal under consideration is a restricted one dealing principally with locally supplied, labour-intensive services. Therefore, further extensions of the scope of the proposal should not be considered in this context. Furthermore, bearing in mind the attitude and concrete positions of some Member States, this extension would surely jeopardise the unanimous support, which we very much need, in the Council.
On Amendment 5: the amendment relating to the addition of monuments and gravestones is not necessary, as a reduced rate for these supplies is already allowed by the current provisions when provided by funeral undertakings. Moreover, renovation, repair, maintenance of cultural heritage and historical monuments is also covered by the current Commission proposal which is under consideration.
On Amendment 7: I can assure you that the Commission is very keen to specifically address the question of the use of reduced rates in order to promote energy efficiency. This will be done in the framework of the 'Green Tax Package' currently under preparation and will be coming to the Council and Parliament in April.
In conclusion, I want to declare that the proposal would support housing, support the SMEs and save jobs, which is fully in line with the European Economic Recovery Plan. It is not an obligation but an option: Member States can decide whether or not to apply it, so it even extends their tax sovereignty.
Olle Schmidt
draftsman of the opinion of the Committee on the Internal Market and Consumer Protection. - (SV) This report demonstrates that taxation is a sensitive issue, and I respect that. At the same time, however, I think that we could have handled the matter better in the Committee on Economic and Monetary Affairs, which was responsible for the report. We are now tabling the text for a resolution, which is a good thing.
It is, of course, extremely important that the internal market is not disrupted by unreasonable and unfair competition. There are grounds for reiterating this at a time when State aid seems to be flowing in abundance.
However, the EU needs a more sensible view of how reduced VAT rates can be used to promote jobs and growth, particularly on the local market and for labour-intensive services. This is what the Commission's proposal is all about. In other words, it is about more jobs, but it is also about tackling the black economy. Thus, we need reduced VAT on the likes of restaurant services, care services for young people, the sick, the disabled and the elderly, hairdressing services and new goods such as audio books, which are very important in my own country, CDs, child car seats and babies' nappies, as well as domestic services such as renovation and repair work and cleaning.
In the Committee on the Internal Market and Consumer Protection, we fully supported the Commission's line and added Amendments 6 and 7 under Mr Harbour's name. As an aside, I would like to say that it is not easy to understand how these texts and the voting procedure are handled in this Parliament. In the first of these amendments, we emphasise the importance of reducing the 'black' or 'grey' economy. In our other amendment, we aim to make it possible to lower the VAT rate on renovation and repair work in order to save energy. During these difficult economic times, different means need to be used to boost the economy and a reduced tax may be an important method of achieving this.
Finally, Mrs Lulling's promotion of alcohol comes up once again. As usual, I will politely, but firmly, reject her call.
Astrid Lulling
on behalf of the PPE-DE Group. - (FR) Madam President, today's discussion - and the previous speakers have confirmed this - is taking place in very unusual circumstances, since we do not have a report for the plenary as would normally be the case. I want to make things quite clear: it was an ill-assorted majority that voted against the report in the Committee on Economic and Monetary Affairs.
My group voted against this report, although we fully support the principle of extending the application of a reduced rate of VAT even beyond what the European Commission is proposing. That is because all of our amendments have been rejected by the socialists and the liberals.
We had made a great effort to compromise. We accepted all the socialist rapporteur's proposals. She did not think it was worth making the slightest effort to accept any of our proposals. The regrettable, but at the same time inevitable, result of the vote should not, therefore, be surprising, Mrs van den Burg.
I would like to offer you some friendly advice to change your attitude in future because as the Romans used to say, errare humanum est, perseverare diabolicum ['to err is human, but to persist is diabolical].
Let us, however, come back to the matter in hand. For the plenary my group decided to retable some amendments that came from the Members of the committee that is knowledgeable on the subject. These amendments are important, and it has been said very clearly, Mrs van den Burg, that no one can prevent a Member from proposing amendments to a document or to a resolution.
The most important of our amendments concerns applying reduced rates to alcoholic beverages in restaurants. It is not, Mr Schmidt, a way of encouraging alcoholism. That is ridiculous. If the Commission's proposal were accepted, restaurant owners would have to apply two different rates of VAT. It is complicated and it is not justified. Long live red tape. Believe me, if you do not vote for Amendment 3, I know how to inform the whole of Europe's catering sector - and it is large - that your position has prevented the application of a reduced VAT rate on all its services.
I proposed that food and all drink should be taxed at the same reduced rate, if it is applied. To me this is just common sense and I think that we could all support this proposal. Why complicate matters? Why look for public health issues where there is no reason for there to be any?
Madam President, my group supports the extension of reduced VAT rates and we urge our governments to take this issue forward. Our fellow citizens already had high expectations in this matter at this time of economic crisis and the daily catalogue of bad news. This measure supporting the food industry is becoming increasingly necessary, Madam President. We want Europe to be recognised for its flexibility; that would indeed be a positive sign.
Pervenche Berès
on behalf of the PSE Group. - (FR) Madam President, Commissioner, as you know, the European Parliament recognises that your job is difficult. It is not easy here, but when you are in the Council, it is worse, because there you have to work with unanimity. I hope, therefore, that everyone here will behave responsibly and vote in a coherent way. If we think that the Commission's proposal is good, then we must support it.
Quibbling in the Committee on Economic and Monetary Affairs led to certain amendments being singled out. The socialists, behaving responsibly, once again, decided not to table any amendments at all in plenary, because in these matters, if we want to move forward all we in the European Parliament have to do is to give our overwhelming support, as far as possible, to the Commission's proposal, if we consider it a good one, as is the case here.
We have had many debates about VAT, about subsidiarity and about the need for tax harmonisation. VAT is the classic example of us all being on common ground. Let us make use of it. Renewing, on a temporary basis, this experiment with a reduced rate of VAT, when it aims at and contributes towards strengthening labour-intensive services - not necessarily the case for alcoholic drinks in restaurants - has shown us that this system works, so let us build on it. Let us put an end to legal uncertainty and harmonise the basis on which Member States can intervene. We will then have consistent goals, tax harmonisation where possible and encouragement for labour-intensive services. Who could say no to that today? Who could say no to using tax reductions as an incentive to consistently improving energy efficiency in our housing stock?
Today, taking into account what happened in the Committee on Economic and Monetary Affairs, taking into account the debate that I see taking place in the Council, I believe that we must support the Commission's proposal very strongly - and I hope with the largest possible majority. At this stage of the debate, trying to do better could turn out worse and I think that our fellow citizens would not understand our remaining in a state of legal uncertainty.
We need to consolidate this system that has been shown to work. That is what our rapporteur, Mrs van den Burg, is proposing, and that, I hope, is what Parliament will vote for overwhelmingly later on. In this way, the Commissioner can take this strong message to the Council and obtain a final decision which will make it possible to consolidate this system.
Alain Lipietz
on behalf of the Verts/ALE Group. - (FR) Madam President, Commissioner, ladies and gentlemen, since this is one of the last chances we will have for doing so, I should like, first of all, to thank Mr Kovács for the efforts, often disappointing, that he has made over a number of years here, in a situation where taxation is subject to the rule of unanimity, and thus subject to veto by the various Member States. His task has been very difficult and he may feel not much has been achieved. I hope with all my heart that his crowning achievement, this directive, will go through with solid support from Parliament.
The proof of the excellence of his work is that, when we wanted to improve on it in the Committee on Economic and Monetary Affairs, we were unable to do so. Some people were pulling in one direction, others in another. Each side was convinced we could do better. We managed to put through some of the better amendments, or so we thought, and then when we voted on the whole text, we realised that it was not going to work.
In the end, the group's coordinators reached the consensus that Mr Kovács had probably struck the right balance. Therefore, the Group of the Greens/European Free Alliance, like the other two groups that have just spoken, will not be tabling any amendments. You have struck the right balance and it is an intelligent one.
Some countries, today, faced with the crisis, are reducing all their VAT rates. I am convinced that this is a mistake. Member States need financial resources and this is not the time to go deeper into deficit in that way, even if you are doing so to stimulate the economy by encouraging spending. Another reason is that trying to reduce prices by playing around with VAT leads to very high real rates at a time when the Central Bank is trying to lower them.
You are proposing another strategy and you are right: using VAT to make targeted reductions or targeted changes in relative prices. These are the right choices, according to two criteria.
Firstly, subsidiarity. In other words, you are targeting immobile products: local services and construction. Your second criterion for targeting is labour-intensive services. As environmentalists, we would have liked you to target the green revolution specifically: the sectors that are necessary if we are to emerge from the current crisis, which is the result of the industrial, liberal and productivist model that has dominated the world for more than 30 years.
We would have liked you to extend the reduced VAT rates to all goods covered by the Kyoto Protocol. In practical terms, if we combine locally supplied with labour-intensive services, then this would mean that all the construction, all the insulation, and all the development of energy efficient buildings could be covered in the directive, and that is good enough for us.
I should like to say straightaway that we shall obviously not be voting in favour of Mrs Lulling's argument. Of course, it is diabolical to persist in error, but I think this saying could equally apply to Mrs Lulling herself. We could also talk about Mandeville and private vice for public virtue. We shall not encourage private vice through public vice and we will defend those countries that try to limit alcohol consumption.
Helmuth Markov
on behalf of the GUE/NGL-NGL Group. - (DE) Madam President, Commissioner Kovács, ladies and gentlemen, and especially Mrs van den Burg, it is regrettable that here in Parliament we are only able to agree on the Commission's proposal and not on the actual report produced by Mrs van den Burg. We would have gladly given our support to this report in its original version and we congratulate the rapporteur. However, it has been rejected by the majority in the Committee on Economic and Monetary Affairs. The decisive factor was the 'no' vote from the Group of the European People's Party (Christian Democrats) and European Democrats and the Group of the Alliance of Liberals and Democrats for Europe. After the defeat in the individual voting, the committee was not then prepared to adopt any report at all, and this we very much regret.
When it comes down to it, we have a lot to gain from the Commission's proposal for a directive. We particularly welcome the fact that the Commission gives a positive assessment of the results of the Copenhagen study that was commissioned by the Commission itself. The study proposes the retention, and even the extension, of reduced VAT rates on services and other activities. This will secure jobs, particularly in small- and micro-sized enterprises, and bring whole sectors out of the underground economy and transform them into a regulated economic activity. In the present crisis, this stabilisation is very important. It will secure, and hopefully create, jobs.
Of course, we on the Left welcome the reduction in VAT rates as a matter of principle. It is well known that, being an indirect tax, VAT hits those dependent on their wages and low earners particularly hard. High and very high earners must bear a greater tax burden. In recent years, these high earners have had their burden reduced in an irresponsible manner in all European countries.
The Commission's proposal is intended to be a regulation of unlimited duration. This, too, is welcome. This will avoid the less than ideal situation of us having to extend the reduced tax rates every couple of years. It will create legal certainty for the service providers. As a German Member, I am particularly pleased that the German Federal Government has finally ceased its blocking of a permanent regulation. This is something positive for a change from the grand coalition in the Federal Republic of Germany.
Of the amendments tabled, we support those that are in favour of extending the reduced VAT rates. As regards the supply of alcoholic beverages, however, the existing regulations should remain in place. As we know, higher VAT rates in this area will primarily serve to protect public health. Member States should, therefore, be given a free hand in this regard, too. Thank you very much.
John Whittaker
on behalf of the IND/DEM Group. - Madam President, it is hard to believe that we are sitting here today discussing minor changes to the rules on value added tax when EU countries are facing the worst financial and economic crisis since the Great Depression. We continue to pretend that EU economies are not as badly contaminated by bad debt and slump as elsewhere, yet even in Germany output is falling at the staggering annualised rate of 8% and government finances everywhere are stretched to the limit as tax revenue falls and welfare spending rises, and as governments take over private debts and try vainly to stimulate growth.
The worst case is probably Greece with its downgraded government debt still 94% of GDP and with an interest risk margin that is today creeping back to 3%. Greece is going to need bailing out - but by whom? Not by the Germans, they say. Even ardent supporters of the great EU project are now having to accept that if Greek debt is not underwritten, Greece may be forced out of the euro zone. Probably of even more serious concern is the huge exposure of several euro zone countries to defaulting debts of Eastern Europe.
I almost feel sorry for the Commission. For years it has been trying to do as it was told, upholding the rules on state aid, competition and procurement: rules which are essential components of the project but are now being ignored all round. The saddest spectacle is Commissioner Almunia's statement this week that he intends to invoke an excessive deficit procedure against Spain, France and Ireland because they have broken the budget rules of the Stability Pact. Mr Almunia - please - the Stability Pact is broken. It never did have any teeth. Never mind that prudent government finances are essential to the survival of the euro, there is nothing else that these countries can do about their budgets.
No doubt the gestures towards European Union will continue, but democratically-elected governments have a primary interest in looking after the populations that elected them. France and Germany have made it clear that their fiscal stimuli are there to help their own industries and workers. Obviously coordination is only for the good times.
Economies are in dire straits all over the world. Some of them will pull through. If some European Union economies return to prosperity, it will not be thanks to the European Union or to its rules on VAT.
Jim Allister
- Madam President, I do not hold with the notion that our economic salvation lies in tiny value added tax cuts, which are something we have had in the United Kingdom with, frankly, only a marginal positive impact. However, I do accept that reducing the taxation burden is an instrument of economic stimulation. Thus, this proposal - very modest as it is - whereby cuts in VAT would be possible in some sectors, is welcome so far as it goes.
I would have much preferred it to have gone further, beyond the realms of tokenism. Extending it to embrace house renovations and repairs would be its greatest asset, because stimulation of the hard-pressed construction sector is very much required, and, to achieve optimum effect, that concession should not be restricted to energy efficiency measures only. Construction needs help right across the board, not just on a selective basis.
Making it possible for Member States to act in making these marginal cuts in VAT would only be half the battle because in many cases - my own country included - hard-pressed Chancellors of the Exchequer with diminishing revenue resources will perhaps be hesitant and will have to be persuaded to act. Even I would have to concede, though, that on VAT issues such as those covered by this report, they would at least not have the excuse of blaming Brussels if they failed to follow through on what is permitted under these proposals.
John Purvis
- Madam President, I wish to join the Chair of our committee in sympathising with Commissioner Kovács over the difficult situation he faces in trying to get tax issues through the machinery of the Community. He has to use maximum political tact in order to achieve unanimity.
While I wholly support the subsidiarity principle and the sovereign right of Member States to set their own tax rates, I would suggest to Member States which have not as yet taken advantage of the facility for lower tax rates on labour-intensive, localised industries, to seriously consider doing so.
In the country I know best, where we have waltzed into a 2.5% reduction in VAT across the board - with, as Mr Allister says, little or no obvious response or result economically - I would suggest that it would have been much more effective to have concentrated action in the particular areas of labour-intensive, localised industries and to have reduced the rate substantially from 17.5% down to the lower rate of 5%, or below. That would have been much more effective in getting people into work, and activity going again.
Areas such as house renovations and extensions, energy-saving improvements, and perhaps gardening and landscaping work and, as Olle Schmidt said, care for the elderly and care for children, are the ones which would get people into work and probably increase the tax-take, because those people would be paying tax on their incomes as well.
It is a win-win situation to concentrate in those areas, and I urge all those Member States which have not yet taken advantage of this, including and especially my own country, to do so.
Joel Hasse Ferreira
(PT) The interest in adopting this proposal for a directive essentially lies in how it can help to invigorate local economies and support social action. The application of a reduced rate of VAT will be very important in the housing sector, both in construction and in renovation, as it will allow Member States which adopt it to reduce the cost to the end user.
The provision of local services, particularly by small enterprises, may also benefit from this reduction in the VAT rate, thus securing and generating more and better jobs by encouraging the consumption of goods and services, and thus stimulating the economy itself.
Restaurant services, which are fundamental to the smooth functioning of local economies, and increased tourism may in this way gain a great deal at the local level from this reduction in the VAT rate. These services, ladies and gentlemen, should not circulate within the European internal market, which will help to reduce the reservations of certain Member States, already expressed within the Council. As a result, I cannot agree with extending this reduced rate to equipment, whatever the pretext.
The prudent way in which this proposal must be dealt with in the European Parliament should not give governments which have reservations about the European Commission's proposal any pretext to use, in practice, the right of veto afforded to them on tax matters by European legislation. As a result, Parliament must prudently reject any amendments without any real purpose which will only hinder the adoption of the text. As has already been said in this House, not only is the very best the enemy of the good, but the person who wants it all may lose it all.
This proposal for a directive is important not only for strengthening local economies, but also to meet the repeatedly expressed ambitions of various Member States. Let us therefore support the Commission's proposal, as presented. This was in fact the outcome of the vote, with my agreement, in the Committee on the Internal Market and Consumer Protection.
I welcome the work of the rapporteurs and call for the adoption of this proposal in the exact terms in which it came from the Commission and in which it was adopted in the Committee on the Internal Market and Consumer Protection.
DanutBudreikait
- (LT) The regulation of VAT reductions has long been an area demanding a systemic approach. If a VAT reduction is permitted, all countries should have the right to benefit from it, not just those which won that right, but this is an issue for the future. Right now we need to make urgent decisions in order to overcome the economic crisis. The Commission's proposal covers labour-intensive services and locally-based services for private end consumers, including restaurant services, which would not impede the proper functioning of the internal market. However, there are doubts as to whether the restaurant services mentioned are just of local significance, or whether they would encourage different conditions of competition in border regions and have an impact on tourism. My country Lithuania, battling with the economic crisis, abolished VAT reductions. The government based this decision on the National Audit Office's assessment that manufacturers benefit most from a reduction in VAT, but who benefits from an increase in VAT? Price growth, which is disproportionate to an increase in VAT, clearly shows who benefits. This same idea was mentioned in the European Parliament when debating the reduction of excise duty on fuel. Representatives of the European Commission maintained that this will not reduce oil prices. I am pleased that the Commission's proposal being debated is using a different evaluation of Copenhagen economics. Perhaps the Commission could explain to everyone the concept of VAT, its influence on business and the consumer and indicate what measures exist, and moreover, whether they exist at all, to protect the consumer from the producer, as such cases are characteristic of many countries. I agree that VAT reductions must be applied with the economic and social considerations that every citizen should be able to acquire the goods and services they need most and with the aim of strengthening and supporting locally-based services.
Dariusz Maciej Grabowski
(PL) Madam President, the EU is confronting the most serious economic challenge in its history. Firstly, the crisis demands a thorough analysis of the errors inherent in the economic strategy that has been applied to date. Secondly, we need recommendations for effective solutions for the future. In this regard, the efficiency and effectiveness of the tax and VAT system should be analysed. There is no doubt, however, that the tax system and the VAT rate should be drawn up in accordance with the principles of the freedom, independence and sovereignty of the Member States. Our answer to a unified tax system is a resounding 'No'.
The newly admitted Member States, which are often less developed and have a specific demographic structure, with large numbers of young people, require completely different tax policies to the old EU Member States. Wherever possible, therefore, the VAT rate in the newly accepted countries should be as low as possible. Meanwhile, as I myself have put forward, we need to pursue a reduction in VAT across the EU as a whole in the case of cultural goods, such as CDs. On the other hand, we also need to propose a tax on financial operations and speculation. What is happening today, as regards the capital transferred from the newly admitted Member States, is impossible to control and contradicts the fundamental ideological precepts of the EU.
Luca Romagnoli
(IT) Madam President, ladies and gentlemen, I support the rapporteur, Mrs van den Burg, and the whole Parliament if it adopts this proposal aimed at amending the provisions of the VAT directive.
At last we have a proposal that will guarantee equal opportunities for all Member States and improve the working of the internal market as regards reduced VAT rates. The proposal also intelligently respects subsidiarity; it allows States to apply reduced VAT rates for labour-intensive and locally-supplied services, as well as those of social importance such as the construction of housing, personal assistance, and so on, and to small- and medium-sized enterprises in general.
I therefore share the rapporteur's hope that this instrument sets out a fiscal system that will promote employment, increase productivity and reduce the underground economy.
Paolo Bartolozzi
(IT) Madam President, ladies and gentlemen, the European Parliament has always taken a close interest in changes to VAT, whether for the purpose of harmonising rates among Member States, adjusting VAT to the economic climate, or taking account of temporary exemptions granted to new members of the European Union. Although we have taken an overall view, our approach has until now necessarily been characterised by a need for flexibility in applying reduced rates, either to take account of the specific nature of manufacturing sectors, or for economic and social reasons.
The proposal in question is, however, aimed at extending the application of reduced VAT rates to a variety of services, including labour-intensive services, restaurants, locally-supplied services, construction and transfer of housing, and services provided for the disadvantaged.
Far from seeking to harmonise VAT in all Member States, the directive in question, in accordance with the principle of subsidiarity, intends to ensure equal opportunities for all Member States, while allowing them to set their own reduced rates. As a consequence, consumers will be led to transfer certain activities carried out within the local or underground economy to the formal economy, thereby encouraging economic growth without distorting the operation of the internal market. It should, however, be remembered that the majority of the services in question can already benefit from a reduced rate, if only in a limited number of Member States and for a limited period.
The debate remains open, though, on the application of reduced rates for environmental protection and energy saving, on which the Commission is to provide specific assessments, given the importance of these sectors to the EU economy.
Dariusz Rosati
(PL) Madam President, in adding my voice to the debate on the Commission's proposal for reduced VAT rates, I would like to draw your attention to the implications of this proposal in terms of combating the impact of the current crisis. The Member States currently need effective instruments in order to protect jobs and prevent a recession. Reducing the VAT rate for labour-intensive services meets this objective. It lessens the burden placed upon SMEs, facilitates access to basic services and protects jobs. At the same time, it neither distorts competition on the internal market, as it supports businesses providing local services, nor does it pose a threat to state revenue, since the introduction of lower rates remains a voluntary step. This Parliament should support the Commission's proposal and I wish Commissioner Kovács every success in convincing the entire Council to adopt it.
Mariela Velichkova Baeva
- (BG) The European Commission's proposal to permanently reduce VAT rates for locally provided services, including labour-intensive services is timely and aims to achieve rationalisation and simplification through necessary changes, fine-tuning, and creating the potential for the growth in jobs in sectors with low-skilled workforces while restricting activities in the grey economy, retaining jobs and ensuring equal treatment of the Member States including their economic operators.
One of the main arguments for reducing VAT is that it will provide more favourable distribution of income after consumption, by reducing the cost of the shopping basket of low-income households and increasing that of high-income households. The changes in the consumer structure also involve changes in the gross domestic product and productivity in the official sector, and the reduction of activity in the grey economy, such as services in the housing sector and other local services which are the subject of the present proposal by the European Commission. Of course, the potential net economic benefit of reducing VAT rates depends not just on the characteristics of the relevant sector, but also of the specific economic environment in the relevant Member States. For example, increasing the scope for reduced VAT rates in sectors with unskilled workforces presupposes an inflexible labour market, while in the food sector it presupposes significant differences in consumption between high and low-income households.
We should also bear in mind implementing VAT reductions will also reduce treasury revenue. As a proportion of the gross domestic product, this ranges from half to one-and-a-half percent of the GDP of the different Member States. Stable public finances during the current period of economic upheaval will allow the relevant governments to deal with the structural deficits in the current period. Even governments which do have room to manoeuvre will make use of options such as cutting VAT rates for labour-intensive services in order to achieve other aims of their economic policies. In view of the above facts and arguments, the Group of the Alliance of Liberals and Democrats in Europe will support the Commission's proposal to ensure there is sound support in the European Parliament for this important stage of the decision-making process.
Roberta Angelilli
(IT) Madam President, ladies and gentlemen, the proposal to extend the application of reduced VAT to certain labour-intensive services, restaurants and the maintenance and construction of buildings represents a great opportunity to have a positive economic impact on the market and employment in the context of the current severe economic crisis. Competition will not be affected, rather this will be a chance to give a slight boost to production and to stimulate consumption, create new jobs and support businesses and families.
In my opinion, it would be beneficial to extend the scope of reduced VAT rates still further, for example to cover 'green services' in order to encourage environmental policies. As far as the text we are to vote on is concerned, I particularly welcome the proposal to cut VAT on babies' nappies and children's services. This Parliament has asked the Commission and the Member States on several occasions to improve coordination between macroeconomic and social policies in order to redress the rise in new forms of poverty. Indeed, we must not forget that approximately 17% of European families are now living below the poverty line and one child in five is poor.
So we await the Council's response - I hope that it will be able to adopt this proposal as soon as possible and open a wider and more ambitious debate on promoting fiscal policies for families as well as businesses, and perhaps come to extend reduced VAT to all children's goods.
Valdis Dombrovskis
- (LV) Madam President, Commissioner, ladies and gentlemen, within the context of Europe's Economic Recovery Plan, it is being recommended that the Member States should make a temporary reduction in VAT in order to stimulate consumption. In addition, the European Commission has prepared a proposal to extend Member States' options for applying a reduced VAT rate. Wider application of a reduced VAT rate will not only foster economic recovery, but will also contribute to the creation of new jobs and reduce the black economy. The amendments to the directive provide for a significant extension of the opportunities for applying reduced VAT rates. This will apply to catering services, renovation and repair work for housing and places of worship, labour-intensive and locally-supplied services, children's car seats, children's nappies and so on. From the economic and environmental policy viewpoint, it is also important to apply a reduced VAT rate to energy-saving materials and services connected with energy saving and energy efficiency. I call upon the European Commission to speed up the consideration of this issue and to prepare proposals on these points as swiftly as possible. These are welcome changes and demonstrate the European Union's readiness to react quickly to the economic crisis to the limits of its capabilities. I hope that the Council will also support these changes. It just remains to urge the Member States to use these new possibilities in the application of reduced VAT rates. Thank you for your attention.
Antolín Sánchez Presedo
(ES) Madam President, I am in favour of allowing Member States to apply harmonised reduced VAT rates on a permanent basis for certain services of social interest and labour-intensive, locally supplied services.
Measures of this kind are noted for providing citizens with greater purchasing power, improving the environment for SMEs and increasing their productivity, and strengthening the formal economy. At this time of recession this can stimulate recovery, growth and jobs.
It will be beneficial to extend the reduced rates to babies' nappies and equipment for people with disabilities, electronic books, environmental sewerage and recycling works, as well as all housing, places of worship and cultural and artistic heritage, restaurants, gardening and personal care services. For this reason, while awaiting the next energy efficiency package, I support Mrs van den Burg's report and trust that next month political agreement will be reached that will enable it to be implemented as soon as possible.
Margaritis Schinas
- (EL) Madam President, allow me to start, before I address the topic of the debate, to comment on the indescribable and painful attack by the euro-sceptics behind me on the euro zone and the Greek economy; I refer merely to the statements by Mr Almunia and Mr Trichet, who have assured the House that there is no risk of cohesion in the euro zone, that our collective defences are not working and, as far as the Greek economy is concerned, may I inform Mr Whittaker that he needs to get used to the idea that we are still one of the few countries with positive growth and low unemployment, even in these very difficult times. The euro-sceptics are anti-Brussels, anti-Frankfurt, now they are starting to be anti-everything.
Now back to report we are discussing today. I wish to say that we need to look at this issue from two perspectives: from the perspective of when the whole story started, when we were not yet in a time of crisis, and from the perspective of the situation we are in now, with the biggest economic crisis striking deep into the real economy of Europe.
During the first stage, before the crisis, the idea was to focus on the few labour-intensive sectors, such as catering, because we had an impact here, mainly on high prices and the cost of living. Now, however, with the crisis affecting many - if not all - countries, there is also the idea that Parliament, as the mouthpiece of the political views of society, should also make an effort to look at issues which were not covered at the time, at the beginning, such as the issue of agricultural machinery, which my group has the facility to propose in Amendment 2.
As far now as these contradictions which we see on the left wing of Parliament are concerned, where certain issues, such as the energy aspects of buildings, are a good idea, but others, such as agriculture or alcohol, are a bad idea, I think that the best judge is the citizen, not the politicians.
Proinsias De Rossa
- Madam President, the European Parliament's priority today has to be to get the largest majority possible for the Commission proposal to extend and make permanent the option to lower VAT rates on labour-intensive services. This is not an issue for political grandstanding or, indeed, promoting pet projects. Thousands of low-skilled jobs are being lost every day in every Member State. Low VAT rates have been shown to encourage employment in services, assist SMEs, and, indeed, make the informal economy less attractive.
Our responsibility here today is to deliver a strong message to our Member State governments to get on with it. The construction sector badly needs a boost - renovations, repairs, and installations will help achieve energy efficiency, as well as helping employment. Restaurants, childcare and care of the elderly would also benefit.
I support the rapporteur's approach and I hope that my own government, the Irish Government, will opt into this proposal, which unfortunately it has not done to date.
Silvia-Adriana Ţicău
(RO) Last year, the Commission proposed an economic recovery plan which is proving to be very difficult to implement. Member States and their governments must be proactive, especially during this crisis.
Member States can apply reduced VAT rates to the provision of natural gas and electricity, heating or cooling systems, to children's clothing and footwear, to books, newspapers and magazines, pharmaceutical products and medical equipment for the disabled, as well as to restaurant services. It only requires vision and political will.
The building sector has the largest number of jobs. I strongly support the need to allow Member States to apply reduced VAT rates to renovation and repair works aimed at boosting energy saving and energy efficiency.
As rapporteur for the Energy Performance of Buildings Directive, I even proposed reduced VAT rates for products in the energy efficiency and renewable energy sector as well. I support the rapporteur's proposal and I believe that this measure is particularly important, especially during the current crisis.
David Martin
- Madam President, I also welcome the Commission's proposal and believe it to be an intelligent response to the crisis that we are facing. Like others who have spoken, and indeed the previous speaker, I strongly believe that this proposal must apply to energy conservation, and energy conservation measures must be a high priority of the Member States.
Reduced costs for home installation would achieve three of our cherished objectives. It would reduce environmental damage by reducing CO2 emissions, it would assist in job creation, because energy conservation measures are very labour-intensive, and thirdly, in the long run, it would of course lower energy bills for the elderly and other vulnerable people in society.
I hope that the Commission will press ahead with this proposal, that it will persuade the Member States that so far remain unpersuaded and that it will emphasise that, as part of the proposal, you can interpret energy conservation measures as being included.
Czesław Adam Siekierski
(PL) Madam President, the phenomenon dubbed the shadow economy is a very grave problem, impinging on every economy to a greater or lesser extent. It is primarily caused by excessive tax burdens imposed by the state, which encourage entrepreneurs to engage in undeclared business activities, bypassing the fiscal system. This results in enormous budgetary losses and an increase in unregistered employment.
In this context, the initiative for introducing a long-term reduction in VAT rates for labour-intensive services and locally-supplied services deserves particular support, as it provides businesses with an incentive to operate within the formal economy. Moreover, it will promote an increase in both productivity and employment. At the same time, however, potential adverse effects, such as the introduction of lower rates to promote free competition within the internal market, or a decrease in budgetary revenue, should be taken into account. Therefore, balanced and transparent measures are essential, since obtaining the trust of our entrepreneurs is a prerequisite for the project's success.
Margarita Starkevičiūt
- (LT) I would like to talk about value added tax from two points of view - social justice and competitiveness. From the point of view of social justice, value added tax is regressive, that is, people on lower incomes face a greater burden and therefore we then have to increase social subsidies. Perhaps we should do the opposite. From the point of view of competitiveness, Europe is a service economy. We can compete globally by using our services to attract tourists and, undoubtedly, it is important that those services are cheap. Compared with the USA, our sales tax, or value added tax, is much higher. Perhaps we should consider this perspective when talking about a more coordinated tax policy, although, clearly, all of this is a matter for Member States to decide.
Ewa Tomaszewska
(PL) Madam President, the effects of the crisis are already clearly visible in the Polish housing construction industry, despite the country's extremely pressing need for housing. Poland has still not fully restored the housing stock which was destroyed during World War II. I support a significant reduction in VAT rates, particularly with regard to the construction of housing, as well as thermo-insulation and renovation projects, primarily, though not solely, with the aim of protecting jobs and ensuring social cohesion. An aging population in Europe means that we must pay particular attention to the provision of care and I would therefore draw your attention to the need to reduce the VAT rate in that sector as well.
László Kovács
Member of the Commission. - Madam President, I am fully aware of the shortcomings of the Commission proposals: I know that they are modest and limited in scope. However, I am also aware of the reluctance of certain Member States vis-à-vis reduced VAT rates in general and the extension of reduced VAT rates in particular. This reluctance certainly sets limits on our ambitions, as we need unanimity in the Council.
For the Commission, there were two options. The first was to table an ambitious proposal, which is fully justified, and to run the risk that it might not be approved by the Council. In that case, 18 Member States that currently apply reduced VAT rates on locally supplied, labour-intensive services should return to the standard rate. An increase in VAT rates from 5-6% to 20-25% would certainly result in the bankruptcy of thousands of small and medium-sized enterprises and in the loss of tens of thousands of jobs at a time of serious economic crisis.
Therefore, the Commission has chosen the other option, which hopefully will receive unanimous support in the Council: saving jobs, giving support to the SMEs and boosting the building sector.
As many speakers mentioned the issue of energy efficiency, I want to repeat what I already said in my introductory remarks: in April we will come forward with a proposal that will be focused on climate change and energy efficiency issues, a review of the Energy Taxation Directive, and the Green Tax Package proposing reduced VAT rates for green services that are aimed at increasing energy efficiency.
I have been encouraged by the understanding and support expressed in this plenary debate. I thank Parliament for its support and understanding, and in particular the Committee on Economic and Monetary Affairs and Ms van den Burg for their work.
Ieke van den Burg
rapporteur. - Madam President, I am happy with this debate. We have almost unanimous support for the Commission's proposal and I hope that will encourage the Commissioner to have follow-up discussions with the Council on this issue.
I also noticed that many of my colleagues have indicated that they would like their governments to use this instrument nationally in the present crisis. I would like to emphasise once again, particularly regarding energy efficiency and renovation of buildings, that this is a very good instrument. I hope that even the Council will try to coordinate activities on this and decide that together they will take these measures, because then it would be an extra boost, an extra impulse, for the economy.
We have a task at national level to convince our national colleagues and our national governments that they should use these more targeted and more effective instruments in the present situation in order to create more employment - not only to save jobs but also to create new jobs - to legalise the shadow economy and to make these local services available to the many consumers and citizens who will be feeling the effects of the crisis.
I think it is an excellent instrument and I very much hope that the Council will accept this decision and maybe - even more - coordinate and decide to apply this instrument.
President
The debate is closed.
The vote will take place on Thursday, 19 February 2009.
(The sitting was suspended at 10.10 a.m. pending voting time, and resumed at 10.35 a.m.)
Written statements (Rule 142)
Christine De Veyrac  
in writing. - (FR) Ladies and gentlemen, I am delighted that we are at last addressing here in this House the issue of broadening the scope of reductions in Member States' VAT rates on a whole range of goods and services.
The text that the European Commission presented on 28 January 2009 proposed applying a reduced VAT rate to several categories of activity, particularly the catering industry.
It is a measure that I have been wanting and for which I have been calling for a number of years. After years of inaction, I hope that Member States can at last agree on this measure.
The European Commission's proposal follows the German declaration of 20 January, stating that it was no longer opposed to the introduction of a reduced rate in this sector. This coincidence gives us cause to hope for significant changes.
In this time of crisis, I think that if a measure of this kind came into effect, it would make it possible to increase workers' salaries in this sector, and would give restaurant owners the opportunity to recruit more staff.
The text on which we are voting today must send a strong signal to that effect.
Thank you for your attention.
Nathalie Griesbeck  
in writing. - (FR) For our fellow citizens, tax harmonisation constitutes a basic safeguard in the fight against economic inequalities and social dumping in Europe. I call on the Council to work towards this.
For all that, it seems clear that measures related to derogations on normal VAT rates may in some cases, taking into account the particular economic and social circumstances of each Member State, be able to act as a lever on locally-supplied services, including labour-intensive services. I am also very pleased that this proposal for a directive allows the application of reduced VAT rates to some services linked to the construction sector as well as catering services.
I also wish to thank the Commission by emphasising the technical adaptations that we and the members of the Intergroup on Family and Protection of Childhood have always wanted, concerning the application of reduced VAT rates to essential products for children, in particular babies' nappies which represent a very significant item in the budgets of young families. The same goes for some equipment for people with disabilities; these provisions are heading in the right direction.
Mieczysław Edmund Janowski  
in writing. - (PL) The issue of taxation falls within the remit of the Member States. However, common frameworks should apply, guaranteeing that the law is both transparent and free from ambiguity, and that the market operates cohesively and smoothly. The inhabitants of my country are unable to comprehend why a zero VAT rate is applied to children's items in Ireland and Great Britain and a rate of 3% applies in Luxembourg, while Poland is expected to increase its VAT rate from 7 to 22%.
Now, when we are undergoing a painful economic crisis, it is essential to seek solutions which will promote increased productivity and a growth in employment. Harmonising VAT exemptions is thus highly recommended, in order to avoid any discrimination that might result from the implementation of this tax. Reducing VAT rates for labour-intensive services on local markets, including the catering sector, should be considered as a very positive step, particularly for SMEs and artisans. Naturally, the lower costs will also benefit consumers. Furthermore, the initiative should restrict the 'informal economy' and undeclared labour. I therefore support the simplified and clarified regulations of Directive 2006/112/EC, the VAT Directive, since their objective is to place the Member States on an equal footing. The current situation demonstrates that it would be worthwhile to conduct an objective debate on the rationale of applying the tax on goods and services in the form hitherto employed. There are countries, the USA for example, where other forms of indirect taxation are applied and which, generally speaking, lead to a more dynamic, flexible and efficient economy. I spoke of this some time ago.
Véronique Mathieu  
in writing. - (FR) At a time when Europe is faced with a major economic crisis, adopting this report will make it possible to revitalise the services sector by asking Member States to accept a reduced rate of VAT of 5% on labour-intensive services and locally supplied services. This would affect the catering trade, home-care services and hairdressing salons.
Exemptions from VAT need to be harmonised because there are currently 11 Member States that are entitled to derogations and apply reduced rates for the catering trade for example.
A reduced VAT rate will benefit employment levels and will help in the struggle against the hidden economy as well as stimulating local demand.
In my opinion, we should go further still and also consider a reduced rate for cultural products such as CDs or videos, as well as environmentally-friendly products such as green cars or energy efficient buildings. The reduced VAT rate for some sectors will help to boost SME activity, while encouraging the establishment of an economy that is more environmentally friendly.
Rovana Plumb  
In July 2008, the European Commission adopted a proposal on applying reduced VAT rates after 2010.
The sectors targeted in particular by this measure are labour-intensive services and locally provided services for local consumers such as services linked to the housing sector and the renovation of residential heating systems, as well as services linked to personal care and the catering industry.
The proposal is also part of the Small Business Act initiative which aims to stimulate activity in the more than 23 million small- and medium-sized enterprises in the EU with a view to developing the economy and creating new jobs.
I support this report because carefully targeted VAT rate reductions offer specific benefits such as a means of creating a tax system which promotes jobs, increases productivity and reduces the black economy, especially in the current financial crisis.
I call on the Commission to closely monitor the application of these reduced VAT rates in Member States in order to ensure the smooth functioning of the internal market. I congratulate the rapporteur.
José Ribeiro e Castro  
Today's debate and vote on reduced VAT rates will send a clear signal to the Council along the lines stressed by the Intergroup on Family and Protection of Childhood over the years. Among the various amendments that I support, I would highlight those directly affecting children's goods. This is an important measure which supports families with children and allows them to reduce the unfair tax burdens to which they are subject. I welcome the Commission's proposal to resolve, once and for all, the nonsense of the nappy debate and the issue of car seats for babies. However, it is also important, as the Group of the European People's Party (Christian Democrats) and European Democrats has argued, for the reduced VAT rate to be applied to children's footwear and clothing throughout the EU, and not just in the Member States which had this system in 1991. We call on the Council not to lag behind Parliament and to go as far as necessary in understanding the legitimate needs and aspirations of families. I hope that we are finally at the successful end of a long struggle and demand by civil society and Members of this House to defend the tax rights of families who should not be penalised because of the children they rear, support and educate.
Bogusław Rogalski  
in writing. - (PL) Levelling the playing field for all the Member States, and increasing transparency and cohesion within the borders of the EU, are matters of crucial importance, as reduced VAT rates will enable the internal market to function smoothly
It should be possible for the Member States to apply a reduced VAT rate to locally-supplied services, for example. The application of the reduced rate should most certainly be left in the hands of the Member States, while the tax system should promote employment, increase productivity and curb the 'informal economy'. It is equally essential to harmonise VAT exemptions, as this will help to ensure a balanced and uniform approach on the part of the Member States and avoid the adverse effects of applying those VAT rates.
A reduction in the VAT rates for locally supplied and labour-intensive services should have a positive impact, since it will reduce the level of undeclared labour, whilst also reducing its appeal and increasing demand within the formal economy. However, if the reduced rates are to avoid damaging the smooth functioning of the internal market, they should be applied with care.
The political objective to reducing the VAT rate is to reduce undeclared labour and potential administrative burdens.
Eoin Ryan  
in writing. - We are in a global crisis, but a global crisis that is hitting locally. The turmoil started across the Atlantic, but has affected our cities, towns and villages. Measures introduced to combat the crisis and to rehabilitate our damaged economies must not concentrate solely on the national and international but on the regional and local also.
Extending reduced rates of VAT to locally supplied and labour-intensive services is a positive step in this direction. It is a pragmatic decision that has the potential to stimulate local economy and encourage local enterprise and industry without interfering with the proper functioning of the internal market.
I hope that this measure can be part of a wider approach adopted by the EU and national authorities to make it attractive to buy local, to build up local economies and consumer confidence.
Such an approach would impact positively on small and medium enterprises. This is crucial as SMEs make up 99% of all European enterprises, but the sector is suffering in the current climate. I believe that strengthening and supporting the SME sector is key in getting our economies back on their feet and building for a sustainable economic and social future.
Marianne Thyssen  
in writing. - (NL) Madam President, ladies and gentlemen, for years, the European Parliament has been arguing for the extension of the list of goods and services to which a reduced VAT rate may optionally be applied The call for a reduced VAT rate in the Member States for things including catering services, building renovations and small repairs, such as shoe repairs, has become ever more pronounced.
There are three reasons for this. The European harmonisation of rules on VAT rates promotes transparency and the smooth functioning of the internal market, and works as an incentive in the fight against illegal work. Moreover, at long last we can look forward to ending a time of consecutive experimental periods, and to legal certainty for a problem that has been around for a very long time. In times of crisis, these measures can be an important incentive for a number of industries.
This is why I am endorsing the van den Burg report, and I look forward to a political agreement on 10 March in the ECOFIN Council.
