Malta
faces the possibility of losing its reduced value added
tax rates at year’s end should European finance
ministers fail to reach an agreement by then.
EU finance ministers meeting on Tuesday failed to
approve an extension of the five per cent reduced VAT
regimes in Malta and four other “new” EU member
States, although they expressed hope of ironing out a
solution to the issue at their next gathering on 4
December.
On
EU accession, Malta, the Czech Republic, Cyprus, Poland
and Slovenia were allowed individual derogations to levy
a five per cent tax rate on certain products such as
labour intensive services, printed material, restaurant
services and care for the elderly until 31 December
2007.
Efforts are underway at both the Council and the
European Parliament to provide for a further extension
until 2010. The latter also has a consultative role in
the matter and prospects of offering a feasible deal to
the Commission are said to be positive. Similar
derogations on the zero per cent VAT rate on food and
medicines expire in 2010.
At Council level however, unanimity on issues if
taxation is required. At Tuesday’s meeting, France
said it would support a slightly shorter extension until
30 June 2009 in return for a Commission proposal for it
to be able to lower VAT on restaurant meals.
Germany and Denmark, however, refused to approve the
extension, claiming the conditions stipulated in the
countries’ accession treaties must be fully respected.
The Commission has begun a review of all the reduced
rates of VAT the member States levy with the aim of
creating a more streamlined system of reduced rates. The
system is to be presented next year and would enter into
force in 2010.
The three-year extension would avoid a politically
sensitive situation in which the five States have to
raise the reduced five per cent VAT rates to at least
the minimum 15 per cent, while consumers in other States
would continue to enjoy lower rates until 2010.
Reduced rates in the Czech Republic, Cyprus, Malta,
Poland and Slovenia are, however, due to expire at the
end of this year, as agreed under their EU accession
treaties.
According to EU taxation commissioner Laszlo Kovacs, the
idea should become a part of the commission’s wider
plan to “simplify and rationalise” the use of
reduced value added tax in the EU.
Currently, EU States must apply a single VAT rate of at
least 15 per cent, 18 per cent in Malta’s case, but
they have the possibility to introduce two reduced rates
set no lower than five per cent, while other States also
enjoy individual derogations.
Source
:
Malta
Independent Online - Malta, dated 19/11/2007
