EU Proposes Applying VAT to Postal Services

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State-run postal operators in Europe would begin charging Europe's Value Added Tax on all postal services and stamps under a proposal this week by the European Commission.


Currently, only private postal operators charge a VAT on their postal services. Though it may seem that this would give the state-run postal organizations an advantage, the EC says that the move is being done to help state-run operators be more competitive.


That is because under European Union law, state-run groups cannot deduct the VATs that they pay on fuel, vehicles and other expenses since they do not charge a VAT. Private operators, however, are permitted to deduct VATs they pay on expenses because they also charge VATs on their services.


"The proposal would make the VAT system fairer and level the playing field for all operators, leading to improved postal services for everyone," said Frits Bolkestein, European commissioner for taxation and the internal market.


To counter any price increases for private consumers, the EC proposes that the 15 countries of the European Union apply a reduced VAT rate to "standard postal services" that involve addressed items up to 2 kilograms in weight. This could include First-Class/Priority Mail as well as direct mail, books, catalogs and newspapers.


The EC also said that businesses also likely would see little impact in their postal costs since they would be able to deduct the VAT.


Not all state-run postal groups agree, however.


"The last thing we would want any of our customers to face is an increase in their postage due to VAT," Royal Mail said in a statement. "It would not benefit any customers, and while many customers could recover VAT, a great many would not be able to."


It said that small business and charities, many of whom rely on mail for fundraising, would be the hardest hit along with consumers.


An Post, Ireland's national postal service provider, said the plan is "not good news for anybody. We will be making our feelings known to the government on the issue."


No timeframe has been given for when the proposal may be implemented. The tax would not apply to mail entering Europe from outside the continent.


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