European Commission proposals to allow VAT cuts on labour intensive and locally-provided services have been welcomed by the UK’s Federation of Small Businesses (FSB), which called on the UK to support and implement the tax cuts.
The European Commission has put forward proposals that would allow member state governments to reduce the rate of VAT on services that are provided locally and are labour intensive.
These would include housing services, such as construction, maintenance and cleaning; restaurant and catering services; domestic care services, such as home help and care of the elderly; personal care services, such as hairdressing and beauty treatments; gardening; and the repair of movable, consumer goods, such as computers and clothes.
Under the current rules, governments are only able to reduce VAT rates in just two labour-intensive sectors.
The FSB has called for the British government to seek a less rigid application of VAT rules to enable more flexibility in reducing sales tax. It has also insisted that the UK’s historic exemptions – in place since EU accession – remain.
Tina Sommer, the FSB’s EU and international affairs chairman, said: “As the credit crunch bites, some of the first luxuries to go will be home improvements, eating out and a trip to the hairdressers, so local businesses in these areas will welcome this move. The British government must take advantage of these proposals to ensure our high street can survive the economic downturn.”
Ms Sommer added: “National governments should be given more control over how they use VAT to stimulate demand, so long as there are not drastic consequences for the Single Market. The UK has been allowed to exclude certain items, such as newspapers and children’s clothing, from VAT altogether, and this historic exemption must continue.”
In 1999, the Commission began a three year experiment to see whether reduced rates of VAT in certain sectors would have a positive impact on job creation and combating the black economy. National governments could submit to reduce VAT to not less than five percent in two labour-intensive areas. This experiment has been extended several times, but now the Commission has suggested formalising the arrangement to allow national governments more flexibility in applying reduced rates to stimulate the economy. More information can be found on the Europa website.
Link
Please register or log in to add comments.
There are not comments added