The case-file on reduced VAT rates has been a priority for EBC and its member organisations for almost 20 years now. In 1997, EBC was amongst the promoters of a reduced VAT rates campaign, submitting this proposal to the European Commissioner in charge of taxation, Mr. Mario Monti. In 1999 the European Union adopted a Directive which allowed a 3-year experimental application of reduced VAT rates to labour-intensive services.
The measure was extended for a further year (2003) in order to assess its impact. It has been a success. In France the housing maintenance and renovation market made it possible to create 55,000 jobs. The estimations for the total amount of created jobs in the countries that have applied the reduced rates on housing maintenance and renovation vary between 200,000 and 250,000 in the construction sector.
After several extensions of the trial period, in 2009 the construction sector obtained a permanent possibility for Member States to reduce VAT rates for “labour-intensive services” such as housing maintenance and renovation works.
The application of reduced VAT rates on the renovation and repair of private dwellings has a direct link with job creation, as it increases the demand for these services. Reduced VAT rates would also have a positive impact on law-abiding businesses, because they would reduce the competitive advantage of firms operating in the informal economy.
Moreover, today there is a global trend in the market towards energy efficiency renovation works. Therefore, the application of reduced VAT rates works as a complementary measure in an overarching policy of sustainable development.
EBC believes that, especially in a time of crisis, this is a measure that should be looked at and implemented by the governments to boost growth.