Poland backs down over VAT

Poland has agreed to a compromise deal on the row over reduced rate VAT on services after talks in Vienna on 1 February 2006.

Polish Finance Minister Zyta Gilowska accepted the compromise deal at talks brokered by the Austrian Presidency, averting the first major breakdown within the expanded EU-25.

The row was over the proposed extension to a regulation permitting reduced rate VAT, below the EU standard minimum of 15%, on a range of labour-intensive services such as hairdressing and home repairs (see EURACTIV 30 Jan 2006).

Poland had threatened to veto the deal, arguing that the special reduced VAT rates on a wider range of services, contained in its accession treaty, should continue beyond their 2007 cut-off point. Under the compromise agreed in Vienna, Poland’s low-rate exemption for construction work on social housing will continue.

EU Tax Commissioner László Kovács expressed his satisfaction with the “sound and balanced compromise”, saying it offered “firm guarantees to some sensitive economic sectors”. 

The renewed regulation will now continue to 2010.

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