A statement from the European Commission said there was no reason to extend Britain's exemption, which allows the Government to levy only 2.5 per cent on sales of art works created before 1973, instead of the normal European Union minimum of 5 per cent.
The move provoked an angry reaction from the Government, which said it would lobby other member states for a new, EU-wide lower rate for art sales. All 15 member countries would have to agree if the imposition of the 5 per cent rate was to be prevented.
In a statement published yesterday, the Commission said it had found "no evidence to suggest that application of VAT has an impact on the competitiveness of the EU vis-a-vis the markets of countries outside the EU. In practical terms the effect of VAT is rather neutral."
The standard rate of VAT on most products within the EU is between 15 and 25 per cent, with the average at 18 per cent. The normal UK rate of 17.5 per cent is applied to all works of art created after 1 April 1973.
The UK has 61 per cent of the EU's art sales. Many in the art world fear business will be driven to the United States.Reuse content