Friday, 12 June 2009

EU reduced value added tax rules: Cyprus' teeth grinding

In May, the EU Council has adopted the Directive 2009/47/EC ammending an older directive regarding EU-wide reduced rates of value added tax (VAT).

Cyprus abstained in the vote, but from a special statement recently released in an addendum to the Council minutes you can see that it did so with teeth grinding:
"Cyprus currently applies an exemption with deductibility of VAT paid at the preceding stage in respect of the supply of pharmaceuticals and foodstuffs for human consumption. The current application of zero VAT rate on these items is based on a derogation, which after renewal, expires on December 31 2010. Though we are in favour of zero VAT rate on these, in good faith and Community spirit, Cyprus refrained from specifically raising the issue of further extension. [...]

Cyprus considers that the wording of the proposed Council Directive amending Directive 2006/112/EC as regards reduced rates of value added tax should have better reflected the principles of equality and equal treatment of Member States in similar
situations. In this respect, the same derogation should have applied to Member States in similar situations allowing them to benefit from the same special arrangements provided for in Article 111(c).

Cyprus expects that an appropriate way will be found in order to accommodate its legitimate request before the expiration of the said derogation at the end of 2010.
This is yet another example of the group pressure existing within the Council, in particular on smaller states. But it is also an example on the general will to come to common solutions, even in an area that many might not see in the competence of the European Union - VAT.

As a blogger and scientist, those special statements are most valuable to understand special preferences and dynamics within the Council, probably the most intransparent of all EU institutions, so I am always glad to find them.

Because let's not forget:

Although over the last weeks we have been concentrating on the European Parliament - and we will continue, since it is the only directly elected EU body - the EU Council has much more legislative power than the EP, but we hardly understand how it's decisions are made, so it also needs much more thorough attention from our side!

(The whole legislative procedure on the directive here on Pre-Lex.)


Paul Alcock said...

How can Cyprus abstain on the basis of fair VAT rules accross the EC yet charge VAT on essential medicine?