PURPOSE : to amend Directive 77/388/EEC on the common system of value added tax, with regard to the length of time during which the minimum standard rate is to be applied.

LEGISLATIVE ACT : Council Directive 2005/92/EC amending Directive 77/388/EEC with regard to the length of time during which the minimum standard rate of VAT is to be applied.

CONTENT : to recall, the standard rate of VAT currently in force in the various Member States, combined with the mechanism of the transitional system, has ensured that this system has functioned to an acceptable degree. That rate continues to range from 15% to 25% in the 25 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). It is nonetheless important to prevent a growing divergence in the standard rates of VAT applied by the Member States from leading to structural imbalances in the Community and distortions of competition in some sectors of activity. In these circumstances, it therefore appears appropriate to maintain temporarily the principle of a minimum standard rate of 15%, and to propose that the legislation in force be extended.

Since the application of this rate under Article 12(3)(a) of Directive 77/388/EEC expires on 31 December 2005, the purpose of this Council Directive is to enable the Council to extend the period of application of the minimum standard rate. The minimum level for the standard rate is therefore set at 15% for the five years from 1 January 2006 to 31 December 2010.

ENTRY INTO FORCE : 28 December 2005.

TRANSPOSITION : 1 January 2006.

The European Parliament adopted a resolution drafted by Zsolt Lászlo BECSEY (EPP-ED, HU) and made two amendments which reflect those made by its committee. (Please see the summary of 14/11/2005.) The resolution was adopted with 512 votes in favour, 81 against and 10 abstentions

The committee adopted the report by Zsolt Lászlo BECSEY (EPP-ED, HU) amending the proposal under the consultation procedure:

- whereas the Commission had limited its proposal to continuing with the minimum standard VAT rate of 15%, the committee voted to apply a band with a minimum rate of 15% and a maximum rate of 25%. It argued that it was important to prevent growing divergences in the standard rates of VAT applied by the Member States from leading to structural imbalances in the EU and distortions of competition in certain sectors;

- the Commission should carry out a general assessment of the macro-economic impact of implicit and standard VAT rates and the implications for the budgetary revenue of the Member States in the period up to 1 January 2007. The assessment should look at allowing the Member States the same possibilities to apply reduced VAT rates to goods and services.

PURPOSE: to amend Directive 77/388/EEC on the common system of value added tax, with regard to the length of time during which the minimum standard rate is to be applied.

PROPOSED ACT: Council Directive.

CONTENT: the standard rate of value added tax (VAT) currently in force in the various Member States, combined with the mechanism of the transitional system, has ensured that this system has functioned to an acceptable degree. The accession of the ten new Member States on 1 May 2004 did not alter the situation regarding the standard rate. That rate continues to range from 15% to 25% in the 25 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). It is nonetheless important to prevent a growing divergence in the standard rates of VAT applied by the Member States from leading to structural imbalances in the Community and distortions of competition in some sectors of activity.

In these circumstances, it therefore appears appropriate to maintain temporarily the principle of a minimum standard rate of 15%, and to propose that the legislation in force be extended.

Since the application of this rate under Article 12(3)(a) of Directive 77/388/EEC expires on 31 December 2005, the object of this proposal is to enable the Council to extend the period of application of the minimum standard rate. The minimum level for the standard rate is therefore set at 15% for the five years from 1 January 2006 to 31 December 2010.

PURPOSE: to amend Directive 77/388/EEC on the common system of value added tax, with regard to the length of time during which the minimum standard rate is to be applied.

PROPOSED ACT: Council Directive.

CONTENT: the standard rate of value added tax (VAT) currently in force in the various Member States, combined with the mechanism of the transitional system, has ensured that this system has functioned to an acceptable degree. The accession of the ten new Member States on 1 May 2004 did not alter the situation regarding the standard rate. That rate continues to range from 15% to 25% in the 25 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). It is nonetheless important to prevent a growing divergence in the standard rates of VAT applied by the Member States from leading to structural imbalances in the Community and distortions of competition in some sectors of activity.

In these circumstances, it therefore appears appropriate to maintain temporarily the principle of a minimum standard rate of 15%, and to propose that the legislation in force be extended.

Since the application of this rate under Article 12(3)(a) of Directive 77/388/EEC expires on 31 December 2005, the object of this proposal is to enable the Council to extend the period of application of the minimum standard rate. The minimum level for the standard rate is therefore set at 15% for the five years from 1 January 2006 to 31 December 2010.