The European Economic and Social Committee (EESC), which is an advisory body of the European Union, has published its Opinion on the European Commission’s VAT proposal, published earlier this year.

The EESC has highlighted the issue of irrecoverable VAT costs for associations and organisations providing assistance to disadvantaged people and has recommended that Member States be given the freedom to continue applying current derogations and reduced rates. However, the EESC has not asked for particularly strong safeguards protecting these derogations to be put in place.

MEPs from the European Parliament’s ECON Committee are also due to discuss the Commission’s proposal next week, though it is worth noting that the European Council will not be bound in its final decision by the opinions of either the Parliament or the EESC – it is only obliged to consult them.

Key points from the EESC Opinion

• The specific position of ‘organisations and associations providing assistance to disadvantaged people’ in the VAT system, and of the irrecoverable VAT costs they face, have been recognised. The EESC has called for these organisations to be exempt from the VAT regime and for lawyers working on a pro bono basis not to be subject to VAT
• Reduced rates and exemptions be applied primarily for the purpose of achieving a general-interest objective, recognising that intermediate bodies achieving this objective are not final consumers
• The new Directive should not curb Member States’ freedom to establish reduced rates for certain general-interest goods
• Member States should draw up a list of goods and services to which reduced VAT rates will be applied