European Union publishes review on reduced VAT Rates

Tue 21st May 2013

The EU has published a summary of the responses to proposals to reform the reduced EU Value Added Tax rate regime.  Currently, EU member states must levy a standard, higher rate on most goods and services.  However, they are allowed to apply a range of reduced rates to certain public/cultural items (public travel, food, cultural events etc), and zero rates.

It has long been felt that this patch work of varying rates around the EU creates confusion, and hinders the free market’s operations.  This consultation was designed to gather ideas and concerns for the reform of this system.  It received over 300 responses.

The biggest area of concern is the failure of the current EU VAT rate regime to fairly deal with modern-day electronic services (ebooks; streaming video or music).  A number of countries have applied lowered rates to attract the companies that provide these services.  For example, Luxembourg VAT on ebooks is only 3% compared to UK VAT at 20%.  It was pointed out that ebooks should be at the same rate as printed books (most countries have differing rates).

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