France re-opens VAT debate

EU officials were holed up on Thursday discussing a new French proposal on reduced rates of VAT.

An advisor for French prime minister Jean-Pierre Raffarin told EUPolitix that France will try to convince Germany to allow a 5.5 per cent rate of VAT on catering and restaurant services.

No details of the proposal were given but the advisor confirmed it is a new draft with significant changes from the European Commission proposal which was rejected by ministers in December.

Speaking after a meeting with commission president Romano Prodi, Raffarin said he would continue to "defend this project with the same level of enthusiasm" and confirmed he had requested that negotiations be reopened at the 'Ecofin' council of finance ministers on Tuesday.

Talks on the proposal have twice fallen in finance council as ministers have failed to reach agreement on which sectors should be subject to reduced rates.

Germany has always opposed the French restaurant services request, but the UK, Ireland and Luxembourg have also said they will use their right of veto to block the deal if it outlaws their zero VAT rate on kidswear.

The UK also wants to include a zero rate for church restoration.

A unanimous vote by finance ministers is required if the proposal is to become law.

On Tuesday ministers are also expected to approve the two year extension of a tax experiment which has run for the last four years.

The experiment allows certain member states to apply reduced VAT rates to 'labour intensive services' such as building repairs or home help.

MEPs will vote on the extension in plenary session on Thursday.

• Previous article
• Next article