Cypriots, Greeks And Poles 'Strongly Invited' To Accept VAT Deal

by Ulrika Lomas, for LawAndTax-News.com, Brussels

26 January 2006

Cyprus, the Czech Republic and Poland have angered their fellow EU member states by thus far refusing to accept a compromise on extending reduced VAT rates.

Reduced rates of value-added tax levied on 'labour intensive' services such as hairdressing, repair work and house renovations expired on December 31, and the European Commission has threatened to take legal action against countries still imposing the lower rate, if agreement is not reached this week.

However, under a deal reached by all but the three aforementioned EU members this week, the reduced rates would be extended until 2010, albeit on the same services as before, much to France's disappointment.

French President, Jacques Chirac had pledged, pre-election, that he would reduce VAT levels on restaurant dining, but a group of countries, led by Germany, opposed the granting of reduced VAT rates in other areas.

Although the Austrian EU presidency is set to exert increasing pressure on the three rebel member states over the coming week, the prospect of reaching an agreement on the matter on Friday appears uncertain, with the Czech Republic stating that: "There will be no compromise for the sake of European unity."

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