published by on Monday 06 Oct 2008

Following the discussions which took place at the informal September ECOFIN Council and in view of further debates, FIEC holds that notwithstanding priorities at national level as regards budgetary policies – focus on a balanced budget or the promotion of specific policies through reduced indirect taxation – no Member State should be prevented from applying reduced VAT rates on construction activities after 2010 if it wishes to do so.

“According to a FIEC study undertaken in March 2005, it was then estimated that not renewing the existing measures on the application of such reduced VAT rates would threaten up to 250.000 jobs”, stresses Dirk Cordeel, FIEC President, who clarifies that “the abolition of these measures would mainly affect SMEs, which are their principal beneficiaries. Another negative side-effect would be a major increase of undeclared work, which would destroy the benefits obtained hitherto in this field. By contrast, the permanent application of reduced VAT to locally provided services would increase productivity and employment in labour intensive services, such as the construction sector.”

Dirk Cordeel adds that “reduced VAT incite building owners to carry out measures improving energy efficiency which is of major importance as buildings are the single largest source of greenhouse gas emissions in Europe.”

Otherwise, FIEC welcomes the progress achieved in the debates at the informal ECOFIN Council of 12th and 13th September on two major principles:

1.    the application of reduced VAT rates must not create any distortion inside the Internal Market and,
2.    Member States should have fair access to the application of these rates.

FIEC welcomes these statements and recalls that the Commission’s legislative proposal seeks to rationalise the current VAT system and resolve urgent problems by making reduced VAT rates permanent only for some labour-intensive services that are locally provided and which therefore do not create any distortion within the Internal Market. Furthermore, the Commission proposal places all the Member States on an equal footing as regards the possibility to apply reduced VAT rates.

FIEC finally reminds the ECOFIN Council Members that the Commission’s proposal is an optional instrument which allows Member States to choose whether or not to apply reduced VAT rates in a very flexible manner.

For further information, please contact: Mr. Ulrich Paetzold, Ms. Christine Le Forestier

FIEC, Avenue Louise 225, B-1050 Bruxelles
Tél. +32-2-514 55 35, Fax +32-2-511 02 76
e-mail: info@fiec.eu  web: www.fiec.eu

FIEC is the European Construction Industry Federation, representing via its 33 national Member Federations in 28 countries (26 EU & EFTA, Croatia and Turkey) construction enterprises of all sizes, i.e. small and medium-sized enterprises as well as “global players”, carrying out all forms of building and civil engineering activities.