V4.126 Exemption—postal services
The exemption extended to certain postal services stems from Directive 2006/112/EC, art 132(1)(a)1, which exempts 'the supply by the public postal services of services other than passenger transport and telecommunications services, and the supply of goods incidental thereto'. Unusually, the exemption is primarily limited by reference to the provider being subject to a special legal regime with specific obligations, rather than by the nature of the services provided. The UK legislation uses the term 'public postal services' to mean the services provided, whereas in EU legislation the term refers to the provider of the services (the UK refers to the 'Universal Service Provider', ie Royal Mail). The purpose of the exemption, when interpreted in accordance with Directive 97/67/EC, art 32 is that of offering postal services which meet the essential needs of the population at a reduced cost3.
In May 2003, the European Commission proposed legislation4 aimed at removing the exemption for postal services, in order to remove the distortion arising from increased competition between public operators and the private sector. The proposal provided for the standard-rating (with the option to apply a reduced rate) for items weighing 2 Kg or less, and the standard rating of items in excess of this weight. Deliveries of items weighing more than 2 Kg to destinations outside the EU would be exempt with the right to deduct (ie zero-rated). The UK Government stated5 its opposition to the proposal, which was subsequently amended to allow for the
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