Poland Backs Off Anti-EU VAT Measure

by Ulrika Lomas, Tax-News.com, Brussels

18 January 2002

According to reports in December, the Polish Finance Ministry is planning the introduction of a new law banning VAT exemptions on service import transactions if the country receiving the payment is deemed to be engaging in 'unfair tax competition'. The original list of countries took in several of the offshore jurisdictions currently under investigation by the OECD, for example the Cayman Islands, Bermuda and Andorra, but threw up some surprise inclusions - Germany, France, Belgium, and the Netherlands also made an appearance.

According to Polish legislators, the EU member states were considered havens in terms of tax competition because of the 'administrative, financial, and intangible services' on offer. The measure is intended to prevent transfer pricing manipulation intended to move profits to low tax areas (Germany?).

Now, however, and presumably after some fairly straight talking from EU negotiators, the finance ministry has decided to give up the controversial clause in its
amended VAT bill. Deputy Finance Minister Irena Ozog announced that EU countries would be removed from the list, since they ended up there due to a "misunderstanding." OK, we'll believe you.

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