The European Parliament has today adopted proposals on VAT. It lets governments reduce VAT to five per cent on local, labour-intensive services such as building renovations, gardening, cleaning and hairdressing.
John Purvis, who is vice chairman of the Parliament’s Economic and Monetary Affairs Committee, says that member states should take advantage of this flexibility. He comments:
"The blanket two and a half per cent VAT cut in the UK has been largely ineffective in stimulating our economy, but governments should use the freedom to decide if a targeted VAT cut is the best option for their economies.
In the current parlous state of the British, European and World economies, this proposal gives EU member states an opportunity to work in concert to target major reductions in VAT, down to five per cent, on labour-intensive and local services such as renovation of homes, places of worship and of cultural importance. This will be much more effective than the across-the-board reduction of two and a half per cent.
The Council of Ministers should now speedily approve these plans so that governments have greater flexibility in applying VAT rates."