The Ecofin Council has reached an agreement on reforming value-added tax rates by expanding the list of goods and services on which member states can reduce tax. Products that could take advantage of the 5% lower rate now include sanitary pads and masks as well as some digital services (such as Internet access or live streaming of sporting and cultural events), including electric bicycles, and home renovations. These are mainly public health, environmental and digital goods. Ecofin took into account in its ratings “On the digital transformation of the economy “guided by a series of principles,” a note reads, “such as ultimate consumer advantage and the public interest.” The European Parliament will now have to decide on the legislation.
Once the new rules come into effect, member states will have the option of applying two reduced rates of at least 5% to a range of goods and services. As the European Council document indicates, member states are in fact required to apply the standard VAT rate of 15% or more and can apply one or two reduced rates, not less than 5%, to certain products by way of exception.
The new list also includes “pharmaceutical products used for medical and veterinary purposes, including products used for contraception, feminine hygiene protection and absorbent hygiene products” as well as “essential goods for compensating and overcoming disability”. And again: “the right to enter performances, theatres, circuses, exhibitions, amusement parks, concerts, museums, zoos, cinemas,” as well as newspapers and periodicals. On the transportation front, reduced value added tax may be applied to “engines or other vehicles, or the provision of services related to the transportation of passengers”.
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