EU Decides on VAT Concessions

The EU Commission considers the reduced VAT rate of seven percent on objects of art and collectors' items, which currently applies in Germany, to be in breach of European Law. However, cross-party resistance is stirring against the increase in the VAT rate of 19 percent, which is standard in Germany. In this regard, Germany has already lost a similar case before the European Court of Justice.

German cultural politicians across the board had strong words to say against the Commission's attempts. Ultimately, it is not about "minor fiscal policies", but rather the "identity of Germany as a cultural nation". However, if the Federal government cannot convince the Commission regarding its cultural tax policy, - that is would be an important element in the indirect promotion of culture rather than a distortion of competition – Germany is threatening contractual infringement proceedings.

A similar infringement proceeding was settled by the European Court of Justice in May 2011 (Case C-453/09). At this time the EU Commission was demanding that Germany increase the VAT rate for horses from seven percent to the full rate. The arguments in favor of tax concessions – horse meat as a foodstuff and the use of horses in agriculture – did not hold up in Court when faced with the reality of the actual level of horse meat consumption and the only marginal use of horses as livestock animals on farms. From July 1, 2012 the tax on horses is to be raised to conform to European Law.

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