Reduced VAT rates should be accompanied by better information and coherence

On 3 September, the Economic and Monetary Affairs (ECON) Committee of the European Parliament will vote on the draft report regarding the proposal amending Directive 2006/112/EC as regards rates of value added tax (VAT), dealing with the specific rules of applying standard and reduced VAT rates.

EBC supports reduced VAT rates and encourages more Member States to make use of them in order to renovate the building stock in the European Union. However, it is important to keep in mind that a large diversity of VAT rates can lead to higher administrative burdens and compliance costs, in particular for SMEs. Thus, EBC would welcome further harmonisation of VAT rates and provisions between Member States in the near future.

In order to limit complexity for enterprises, and specifically construction SMEs that engage in cross-border activities, EBC welcomes the proposal by Rapporteur Tibor Szanyi (S&D/HU) to establish a Union VAT Web Information Portal, providing quick and accurate access to relevant information for businesses about the implementation of the definitive VAT system in the different Member States. However, EBC suggests to improve this system further. Firstly, by offering the information in all 24 languages, because SMEs often struggle to fully comprehend English; and secondly by adding a service that, once requested, automatically sends information on changes of rates in all countries. This would avoid the need to check rates continuously for each new invoice and thus decrease red-tape.

EBC urges the European Commission to clarify the provision stating that reduced VAT rates and exemptions “shall only benefit the final consumer and shall be applied to pursue, in a consistent manner, an objective of general interest”, because it is unclear what the term “final consumer” refers to. Removing the word “only” as suggested in the amendments by MEPs Sander Loones (ECR/BE) and Othmar Karas (EPP/AT) seems as a step in the right direction because it broadens the provision, but EBC believes that more clarification should be given to ensure that a single VAT rate – reduced or normal – applies independently of whether the buyer is a private person or a company.

Reduced VAT rates have been a priority for EBC and its member organisations since 1997, when EBC was amongst the promoters of a reduced VAT rates campaign. For this reason, EBC welcomes the Commission proposal and the Parliament’s draft report that will allow the current system of reduced VAT rate to be strengthened” says Eugenio Quintieri, EBC Secretary General.

To see EBC position paper on Reduced VAT rates, click here