Proposals by the European Commission for reduced VAT rates for a wider range of services, could provide the government with the means to boost the pressurised labour market, KPMG has found. A recent pilot scheme by the EC could be extended to allow all EU member states to apply a reduced VAT rate of 5% to particular labour intensive services, including the supply of restaurant and catering services, hairdressing, window cleaning, building repairs and maintenance. If the drafted law is approved, the UK would have the option of introducing new reduced VAT rates for these services. As current UK VAT rates stand at 17.5%, those labour intensive businesses would benefit from an immediate 12.5% boost to their bottom line. Tax partner at KPMG Amanda Tickel, said: 'Once approved, these changes present a targeted opportunity for the government to support those working in the labour-intensive services outlined. 'These proposals are backed by the European Commission and other member states, so it is within the UK's power to help drive them through. 'These changes could be the difference between a business survival or failure as the downturn bites.'