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EU presidency cautious on VAT tax deal

Published on 10/03/2009

BRUSSELS – The European Union's Czech presidency was cautious on Tuesday about the prospects for a long-sought deal on reducing Value Added Tax rates as Germany proved reluctant to compromise.

In the latest bid to tackle the vexed issue, Prague has put a compromise proposal on the table for EU finance ministers that would allow especially low VAT rates in a certain number of labour-intensive services.

Because the reform would require unanimous backing from EU states, the issue has been deadlocked for years, with Germany firmly opposed despite recurrent pushes in favour from France, which wants low VAT rates for its restaurants.

"I’m not overly optimistic. I’ve had a whole bunch of bilateral meetings and I don’t know what the outcome will be," said Czech Finance Minister Miroslav Kalousek as he arrived to chair talks with his EU counterparts.

"We need unanimity and that’s hard to get."

Normally, EU countries cannot apply a VAT rate of less than 15 percent in order to avoid big price discrepancies across the EU single market.

However, there is a list of special labour-intensive services which can apply rates as low as 5.5 percent in order to boost jobs. France and others want to expand the exemptions to more industries.

EU ambassadors made progress on reaching a compromise last week after Germany showed some flexibility.

"Hopefully, we can find a compromise but I’m not willing to pay (any) price," German Finance Minister Peer Steinbrueck said as he arrived for the talks.

"Germany is very reluctant because we see no advantage in reduced VAT tax rates. Nevertheless, we try to be helpful but only to a very, very, very limited extent."

AFP / Expatica