Foreword

The Hungarian ministry of finance prepared its draft proposals for the next fiscal year. These include plans to raise the VAT rate on all kinds of training and education, other than the official state schooling, to the normal rate, i.e. 25%. They argue that it is EU expectation. This caused alarm, among others linked to the extensive network of cultural centres (maisons d'animation, community centres etc.), which would be hit hard if the courses done in them would cost that much more, and who knows if the clients are able to reclaim VAT.

The Budapest Observatory was asked to do an instant search and find out what exactly (or approximately) the EU says on the issue. The few hours at our disposal led to the conlusion that the acquis and related texts contain hardly anything. The pages on education fail to mention taxation.

Find below a collection of excerpts that were found as a result of starting from three corners: culture, fiscal harmonisation and combatting unemployment. The first excerpt sums up the interrelationship of culture and taxation. Since the west fails to recognise the role of socio-cultural activities and its institutions, no wonder that they are not mentioned.

In the context of tax harmonisation the statement on reduced VAT rate for certain cultural and social services is promising. Plunging into Annex H is not advisable though. Better refer to the privileges of hairdressers, window cleaners and charwomen.

Fighting against unemployment is absolute priority. So tactically this offers the best cards - except that most cultural houses would hate to be viewed as labour offices, and not foyers of the arts.

The info on Spain, an important member state, applying 0% VAT to all forms of education appears to be a strong point.

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Culture and taxation

European Union action in the fields of value added tax (VAT) and business taxation entails attempting to align the different national systems. An important element of this is convergence of the VAT rates in the Member States. There is a standard VAT rate of over 15% and a reduced rate of below 5%. Cultural goods and services are subject to VAT. As a way of supporting artistic and intellectual creativity, the European Union allows the Member States to apply reduced rates of VAT to certain goods and services such as the supply of books and periodicals, access to cultural events, receiving of radio and TV broadcasts and services provided by artists/performers.

The Council recognises the social and human value which the various forms of voluntary work by young people and the active involvement of youth associations, non-governmental organisations and youth volunteers themselves bring to the various initiatives.

Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value-added tax: uniform basis of assessment [Official Journal L 145, 13.06.1977].

• one or two reduced rates of at least 5% are authorised for supplies of goods or of services having a social or cultural purpose (Annex H);

Council Directive 1999/85/EC of 22 October 1999 amending Directive 77/388/EEC as regards the possibility of applying on an experimental basis a reduced VAT rate on labour-intensive services.

The services in question are:

• small repair services (bicycles, shoes and leather goods, clothing and household linen);
• renovation and repair of private dwellings, excluding materials which form a significant part of the value of supply;
• window cleaning and cleaning in private households;
• domestic care services;
• hairdressing.

Proposal for Guidelines for Member States' Employment Policies 2000 Luxembourg process

Benefit, tax and training systems - where that proves necessary - must be reviewed and adapted to ensure that they actively support employability.

Each Member State:

3. will endeavour to increase significantly the number of persons benefiting from active measures to improve their employability. In order to increase the numbers of unemployed who are offered training or any similar measure, it will in particular fix a target, in the light of its starting situation, of gradually achieving the average of the three most successful Member States, and at least 20%;

4. will review and, where appropriate, refocus its benefit and tax system

•  to provide incentives for unemployed or inactive people to seek and take up work or measures to enhance their employability and for employers to create new jobs
•  to develop a policy for active ageing, encompassing appropriate measures such as maintaining working capacity, lifelong learning and other flexible working arrangements, so that older workers are also able to remain and participate actively in working life.

Communication from the Commission to the Council: Towards tax coordination in the European Union - A package to tackle harmful tax competition

In the wake of the informal meeting of ECOFIN Ministers in Mondorf-les-Bains on 13 September 1997, the Luxembourg Presidency invited the Commission to present to it a paper that could serve as the basis for a discussion of taxation policy.

The Commission communication seeks:

• to identify a coordinated approach to harmful tax competition and
• to promote the development of tax structures in a more employment-friendly direction.

... The burden of taxation is borne more and more by the least skilled and least mobile employees. SMEs and household firms are penalised while the larger enterprises have easier access to the opportunities provided by tax competition between countries.

... Tackling unemployment is the European Union's top priority. However, this requires action not only at employment policy level, but also at taxation policy level.

Commission recommendation of 8 September 1999 for Council recommendations on the implementation of the employment policies in the Member States.

In this document the Commission identifies eight priority areas where it believes that a special effort is needed:

• tackling youth unemployment;
• preventing long-term unemployment;
• reforming the tax and benefit systems;
• creating job opportunities in services;
• reducing fiscal pressure on employment;
• modernising work organisation;
• tackling gender issues in the labour market;
• improving indicators and statistics on employment.

The Commission also points out that lifelong learning is crucial for maintaining employability and the labour market's capacity to evolve. While progress has been achieved in this area, the Commission draws attention to the absence of comprehensive policies and precise objectives.

This guideline was introduced in 1999 but the measures taken have not yet been evaluated. Lifelong learning will again be one of the main criteria used in evaluating the employment policies of the Member States in the year 2000.

Communication from the Commission of 21 November 2001 on making a European area of lifelong learning a reality [COM(2001) 678 final - Not published in the Official Journal].

The Feira European Council in June 2000 asked the Commission and the Member States to identify a coherent strategy to enable all Europeans to access lifelong learning.

Europe's future depends on the extent to which its citizens can face the economic and social challenges. A "European area of lifelong learning" will empower citizens to move freely between learning settings, jobs, regions and countries in pursuit of learning. Hence "lifelong learning" focuses both on apprenticeship from pre-school education to close to retirement, and covers all forms of education (formal, informal or non-formal).

This communication sets out the building blocks of such strategies in order to assist Member States and the other actors concerned. The transformation of traditional systems is the first step towards allowing everyone to access lifelong learning. Other building blocks have been identified with a view to the necessity to:

• develop partnerships at all levels of public administration (national, regional and local) but also between suppliers of educational services (schools, universities, etc.) and civil society in the broad sense (businesses, social partners, local associations, etc.) ;

The Commission ... suggests that Member States make greater use of the European Social Fund, and commit themselves to presenting a survey of tax incentives in the Member States

Commission Memorandum of 30 October 2000 on lifelong learning [SEC(2000) 1832 final - Not published in the Official Journal].

Background
The Commission presented this Memorandum in response to the Lisbon European Council in March 2000 and its conclusions concerning a Europe of knowledge, which have inevitable repercussions in the field of education and training. It is also a response to the mandate given by the Lisbon and Feira European Councils, i.e. to make lifelong learning available to everyone.

Objectives of lifelong learning
The two objectives of equal importance for lifelong learning are the promotion of active citizenship and the promotion of vocational skills in order to adapt to the demands of the new knowledge-based society and to allow full participation in social and economic life.

Commission Communication of 1 July 1999 concerning the Structural Funds and their coordination with the Cohesion Fund: Guidelines for the programmes in the period 2000-2006 [COM(1999) 344 final - Official Journal C 267 22.09.1999].

The objective of the European Union's structural and cohesion policies is to reduce economic and social disparities within the Community. These policies support national and regional policy in regions facing difficulties and on the labour market. While the Member States are responsible for setting their own development priorities, the Community lays down guidelines that they must take into account since the European Union, as part-financier of their programmes, has a right to examine assistance and wishes to promote the Community dimension of economic and social cohesion.

Three areas with particular potential

17. Environment, tourism and culture and the social economy are sectors with high job-creation potential which remains under-exploited:

• Environment: Structural Fund assistance must give priority to investments which follow a preventive approach to environmental hazards, use clean technologies and sound management and encourage the restoration of derelict industrial sites and training;
• Tourism and culture: since these two sectors are closely associated and rich in job-creation potential, Structural Fund assistance must seek to modernise infrastructure, improve workers' skills by training them to exploit the possibilities offered by the new information technologies, promote public/private partnerships and safeguard local heritage and identity;
• Social economy: there are many different types of organisations active in the social economy (cooperatives, mutual societies, associations, foundations, firms), all working in wide variety of fields (competitive markets, health services, neighbourhood services, sports activities, entertainment, youth employment and combating social exclusion). They account for some 5% of total employment in the European Union. Priority assistance in this sector should be given to active support for the creation and development of service suppliers, by means of information, training, advice, financial and technical assistance and support to ensure the longer-term survival of newly-created activities.

An inclusive society, open to all

23. A labour market open to all is a priority for Member States in the European employment strategy. When designing preventive and active policies, close attention must be paid to the needs of the disabled, the ethnic minorities and other categories of the population who may be at a disadvantage.

In order to renew skill levels within enterprises Member States will:

18. re-examine the obstacles, in particular tax obstacles, to investment in human resources

White Paper on education and training "Teaching and learning - towards the learning society".

The White Paper proposes - among others - to treat capital investment and investment in training on an equal basis, for example by allowing companies which have made a special effort on training to enter some of this investment in their balance sheet as part of their intangible assets.