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Commission proposes tax cuts to boost jobs

European Commission - IP/99/1002   20/12/1999

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IP/99/1002

Brussels, 20 December 1999

Commission proposes tax cuts to boost jobs

From 1 January 2000 to 31 December 2002 Member States will be authorised to apply a reduced rate of Value Added Tax (VAT) to specific labour-intensive services such as hairdressing, window-cleaning and small repairs under a proposal for a Council Decision just put forward by the European Commission. The proposal is based on requests received from Member States in accordance with a Directive adopted by the EU's Council of Ministers on 22 October 1999. The Directive was requested by the December 1998 Vienna European Council as part of initiatives to tackle unemployment.

"This measure will be of immediate and direct benefit to job creation by allowing lower VAT, and so lower prices, on specific labour-intensive services", commented Taxation Commissioner Frits Bolkestein. "I am delighted that this initiative can be implemented just one year after the idea was agreed at the Vienna European Council, demonstrating the ability of the Commission, and indeed the European Union, to act quickly".

Under the terms of Directive (1999/85/EC), Member States wishing to introduce reduced VAT rates on labour-intensive services for an experimental period from 1 January 2000 to 31 December 2002 had to notify the Commission before 1 November 1999. To qualify for the reduced rate, services:

  • must be labour-intensive;

  • must be largely provided direct to final consumers;

  • must be mainly local and not likely to create distortions of competition and

  • there must be a close link between the lower prices resulting from the rate reduction and foreseeable increase in demand and employment.

Member States were allowed to choose a maximum of three categories of services from a list of five set out in Directive 1999/85/EC.

The table below shows details of requests submitted by Member States in accordance with the requirements of the Directive and which are subject to the proposal for a Council Decision:

Member State

Sectors
BelgiumSmall services of repairing:

  • Bicycles

  • shoes and leather goods

  • clothing and household linen (incl. mending and alteration)

  • Renovation and repairing of private dwellings completed more than 5 years ago, excluding materials which form a significant part of the value of the supply
  • Greece

    Repairing of clothing and household linen (incl. mending and alteration)

    • Domestic care services
    SpainRepairing of private dwellings, but only where these services are supplied by bricklayers, excluding materials which form a significant part of the value of the supply

  • Hairdressing
  • FranceRenovation and repairing of private dwellings completed at least 5 years ago, excluding materials which form a significant part of the value of the supply

  • Domestic care services

  • Window cleaning and cleaning in private households
  • ItalyRenovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply

  • Domestic care services
  • LuxembourgSmall services of repairing:

    • Bicycles

    • Shoes and leather goods

    • Clothing and household linen (including mending and alteration)

  • Hairdressing

  • Window cleaning and cleaning in private households
  • NetherlandsSmall services of repairing:

    • Bicycles

    • Shoes and leather goods

    • Clothing and household linen (including mending and alteration)

  • Hairdressing

  • Renovation and repairing of private dwellings more than fifteen years old, excluding materials which form a significant part of the value of the supply, but only where these services are supplied by painters or plasterers
  • PortugalRenovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply

  • Domestic care services
  • United-KingdomFor the Isle of Man only, renovation and repairing of private dwellings, excluding materials which form a significant part of the value of the supply

    Member States applying reduced VAT rates to these labour-intensive services are required under the Directive to draw up a detailed report before October 2002 on the operation of the measures in question and its impact on employment so that the impact of the experiment can be evaluated and conclusions drawn for future practice.


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