Pledge On VAT Could Run Foul Of Europe
Labour's manifesto promise to cut VAT on domestic heating fuel could run foul of European Union law aimed at harmonising the tax among member states.
The Conservative government introduced VAT on domestic heating fuel four years ago, setting the rate at eight per cent.
In its manifesto, Labour promised to reduce the rate to five per cent. The new minister for Europe, Doug Henderson, has insisted that Labour will go ahead with its manifesto commitment to cut VAT on fuel this summer.
"We have a manifesto commitment to reduce VAT on fuel and we are quite confident that that is within European Community law and we intend to proceed to implement our commitment," he told BBC TV's Breakfast News.
"There is no question that we are going ahead with our proposal and we have made that quite clear to our partners," he added.
The European Commission has said the plan is contrary to the spirit of EU legislation, and could face legal problems.
Labour's pledge could contravene an EU law designed to harmonise VAT levels across Europe.
Under the law, EU member states are supposed to aim at a standard VAT rate of fifteen per cent. They can adjust their rates upwards towards that level, but not downwards.
A spokeswoman at the European Commission said Labour's plan would be contrary to the spirit of the law. The Commission, she said, was in contact with the British government over the matter.
The government is insisting that its commitment to reduce VAT on fuel will be fulfilled in its first budget. Resolving the problem will fall to Mr Henderson, who was given a warm welcome in Brussels yesterday.
|
