Austria, Denmark, Estonia, Germany, Sweden and Slovakia this week stated their opposition to a further expanansion of reduced VAT rates to labour intensive services.

The six countries objected to proposals which would allow EU member states to apply VAT charges as low as 5% to industries such as hairdressing, some repair work, small-scale construction, and restaurants.

According to reports in the European media, Slovak Finance Minister, Ivan Miklos argued that:

"The proposal is unacceptable, as it would further damage the internal market by adding new derogations for VAT and making the whole of the EU's system of indirect taxes even more complicated and burdensome for businesses."

The labour-intensive services under discussion are currently covered in some member states by a provisional measure, set to expire at the end of this year. Small business groups are likely to have been disappointed by the objections raised this week, as is the French government, which has already promised the country's restaurant industry an extension of the lower VAT rate.