The 24th of March I attended an interesting meeting of the Bruges Group in London. I heard it mentioned by several people that the United Kingdom is ruled by its people through their parliament in the House of Commons. I wish they were right. The truth is that, as members of the European Union, neither the United Kingdom nor Sweden is ruled entirely by its people. The exact amount of EU governance within the member states can be debated, but the fact is that member states are obliged to follow EU commands as long as they are upheld by the European Court of Justice. This is true even if all eligible voters and members of national parliament are opposed to such commands.
An obvious example of the EU’s interventionist policy occurred last month, when the European Commission dismissed an application by the Swedish government regarding the limitation of the value added tax (VAT). Currently, the whole sector of non-profit non-governmental organisations (NGO) is exempted from paying outgoing VAT in Sweden. Unfortunately, the Commission has labelled this exemption a breach of EU legislation and is working to have it removed. The Swedish government plans to fight the Commission’s dismissal to the bitter end. By prolonging a settlement, the Swedish government will be able to continue using the current rules for NGO exemption from the outgoing VAT.
Sweden’s reasoning behind the outgoing VAT exemption is simple. According to the Swedish Department of Finance, there are approximately 120 000 non-profit NGOs in Sweden. These NGOs play an important role in society, often doing essential work on tight budgets. How will society benefit from the long hours that NGOs will have to spend registering their VAT? Many NGOs worry that the added burden of complying with outgoing VAT regulations will be too much to bear.
Another concern of NGOs is that the higher prices that they are forced to charge by including the outgoing VAT will lead to decreased fund-raising and lower revenue. NGOs within the sport sector often raise funds by selling food and drinks at athletic events. More expensive sausages and coffee will give less income to the NGOs. This, in turn, will force them to raise membership fees and/or decrease the scope of the services they offer. In the long run, these effects may cause an inability for NGOs to fill the social needs for which they currently provide. Some argue that the outgoing VAT exclusion hurts competition by giving NGOs an unfair advantage. This is hard to believe, as many fund raising activities are localized events, not steady commercial activities.
Sweden is not the only country under attack. Austria, Finland, Denmark, and the Netherlands are also opposed to the Commission’s actions. These countries, however, do not constitute a majority of the member states and are unable to affect the Commission’s decisions. Furthermore, the European Court of Justice interprets existing treaties and does not take into account the political majority in the Council.
In conclusion, the interventionist policies currently being pursued by the European Union are having a detrimental effect. In many countries, the entire NGO sector will be drained by the Commission’s recent actions. The Swedish people, as well as the country’s political parties, support the outgoing VAT exemption for non-profit NGOs. Unfortunately, this doesn’t matter because Sweden is a member of the European Union.
