MPs back government's decision over VAT on postage stamps
The government has seen its controversial decision to refuse to impose VAT on postage stamps backed by MPs on the Commons European Scrutiny Committee today, despite mounting pressure from Brussels.
MPs decided to keep the issue under scrutiny, after noting that the European Commission had not withdrawn the proposal for a draft directive removing the exemption.
The European Commission has recommended allowing a reduced VAT rate of 5% for addressed letters and packets up to 10kg, the application of the tax to postal operators supplying final delivery services under contract to private operators, and creating a special tax accounting system for postal operators. It also said member states were required to make the changes at the end of this year [2006].
Paymaster general Dawn Primarolo told the committee that negotiations on the directive remain stalled, with no indication that either the present Finish presidency or the following German presidency will find time for further discussions.
The European Commission is challenging the scope of the current mandatory exemption for supplies made by public postal services other than those necessary for the discharge of the universal service obligation.
And one private sector domestic mail operator is seeking a judicial review on a number of VAT issues, including the extent of the exemption.
In the Commons European Scrutiny Committee report, MPs asked ministers to inform them of any developments over the draft directive, as well as keep abreast of the Commission’s ‘enquiry’ about the scope of the present exemption and the judicial review.
