Brussels, 27/01/2006 (Agence Europe) - At the time of going to press, it seemed very unlikely that the Czech Republic, Poland and Cyprus would give their final answer by Sunday on the agreement reached by 22 Member States on reduced rates of VAT (value added tax).
In the meantime, consultations continued between the Austrian EU Presidency and the above three States. Bohuslav Sobotka, Czech Finance Minister, was in Budapest on Friday where he met his Polish counterpart and Austrian officials.
If just one of the three countries were to reject the agreement, the Commission would initiate infringement proceedings against the nine Member States that apply reduced rates to high labour intensive services. Since end December 2005, a legal vacuum has surrounded application of reduced rates to these services due to the expiry of the transitional exemption measure foreseen under Directive 77/388/EEC.
Thierry Breton, French Finance Minister, reactivated the debate on taxation in the EU on Thursday. He recommended harmonisation at EU level of areas that endanger the single market such as VAT on tradeable goods, corporate tax and taxation of energy, according to Reuters. Services provided locally and income tax should come under “subsidiarity”, he added.