EU calls for VAT on mail

Top European policy makers want to cut VAT on labour-intensive industries, but introduce the tax on postal services, writes Jonah Bloom.

Speaking at last week’s European Public Services Union conference in London, EU Commissioner Mario Monti said it was essential to tackle the trend of increasing tax on labour but decreasing tax on capital.

‘We (the European Commission) have put forward a communication to reduce VAT on labour-intensive activities such as cleaning and repair services.

We want to recover some of these services from the black economy and aid employment.’ If member states back the EC proposals at the next Ecofin meeting, the commission will move to begin discussing technicalities.

It is not clear whether chancellor Brown will back Monti’s proposals.

In principle, the government backs the move to cut tax on labour, but the reduction of VAT on labour-intensive activities would benefit the French, Spanish and Italians more than the British.

Michael Aujean, head of the European Commission VAT directorate, said the EU should introduce VAT on postal services.

‘Postal services were VAT-exempt in the 1960s because they were public services, but that exemption no longer makes sense as 60% of post is for businesses. Courier services are at a disadvantage because they are taxed. It is possible and fair to tax these services, and it has already been done successfully in Sweden. Businesses can be charged more to keep costs down for the public.’

A spokesman for Customs & Excise said: ‘These proposals are only at discussion stage, they need the approval of all 15 member states – and even if they get it, it will be the next millennium before they are introduced. Still, they are worth looking out for.’