NEWS

07Feb2003 BELGIUM: EU seeks to introduce VAT for postal services.

BRUSSELS, Feb 7 (Reuters) - The European Commission will unveil in March plans to oblige former postal monopoly operators to charge value added tax on services to put them at par with their private rivals, a spokesman said on Friday.
Under the plan, public postal operators would be allowed to impose VAT between 15 and 25 percent on services, something private competitors such as Britain's Hays already do.
Member states will have the option to impose a reduced VAT of between five and 10 percent on basic postal services, such as letters and small parcels up to two kilograms.
The Commission said the move would foster competition between private and formerly state-owned operators. But it did not expect the change to lead to price increases in stamps or other services as the firms would be for the first time allowed to reclaim VAT they pay on costs such as acquiring a machine or supplies of certain materials.
"The aim is to reduce distortion and increase competition," a Commission spokesman told reporters. "We don't expect to see a significant rise in the cost of services as state operators will start to deduct VAT from their cost." Business operators, by far the largest users of postal services, welcomed the initiative as they said it would reduce existing disparities between private and public services.
"By imposing the same rule on all postal operators ... users and consumers will ultimately enjoy more choice, better quality and better services," said Philippe Bodson, president of the Free and Fair Post Initiative (FFPI), representing business users of postal services. Business users will be able to reclaim this reduced rate of VAT applied, FFPI added.
The changing environment of the postal service means today state firms directly compete with private carriers in the market for business users, which account for 95 percent of mail volume. At present public mail operators are exempted from VAT, a rule agreed when the sector was not yet liberalised. But since they do not charge VAT, they cannot claim back any VAT on their costs either.
A Deutsche Post spokesman told Reuters the firm could not yet make an estimate of the potential impact of the new rules on the prices of services offered, including stamps.
The rules will need unanimous approval from the 15 member states to became law.

(C) Reuters Limited 2003. Source: REUTERS NEWS SERVICE REUTERS NEWS SERVICE - WESTERN EUROPE REUTERS NEWS SERVICE 07/02/2003