For all the wrong reasons

If I was to hear rumours of tax cuts, how do you think I’d react? Joy, perhaps? Maybe a little happy dance?

Unfortunately, I don’t think I’ll be doing either. Because it’s an EU proposed tax cut.

The EC, which is the executive arm of the European Union, said it wants to relax value added tax and state aid rules in a move to help small businesses (SMBs) cut through administrative red tape and promote economic growth.

Under the VAT changes proposed, labour-intensive and locally-supplied services including restaurants, cleaning and gardening services, domestic care and small computer outlets would be eligible for a reduced VAT rate, in some cases as low as five per cent.

EC Commissioner for taxation and customs union László Kovács said he wanted to clarify Brussels’ position on reduced rates in the various sectors highlighted under the new proposal.

“I want to provide certainty about the application of reduced rates beyond 2010 for labour-intensive sectors and provide all Member States with the same options. There is no reason why restaurant services, for example, should be allowed to benefit from a reduced rate in one half of the European Union but not in the other half,” he said. [emphasis mine]

So, a reduction in VAT to 5% for certain things. All good, yes?

Well, no. And let me count the ways:

  1. Levying taxes – at different rates – is the function of a nation. It is not, nor should it be, the function of any supra-national entity. Following this proposal to the logical conclusion would mean tax harmonisation within the EU, which would likely end up with everyone having French levels of taxation. Which would cripple everyone, not least the smaller, faster and more sensible low-tax countries in the east of the bloc.
  2. It reminds me, once again, of the fact that the power to remove VAT from anything is not held by the nations of the EU, it is held by the EU itself. Which is very fucking annoying.
  3. Why are certain industries being favoured here? Surely if there are reasons for reducing tax (and there surely are) then it should be reduced for everyone.
  4. It has all the hallmarks of being a short term fix to try and cushion any effects of the economic downturn. When any tax reduction should just be made permanent and anyone who proposes raising it again should be horsewhipped…

Aside from that, I’m all for it. Obviously.

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