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Germany leads opposition to EU sales tax cuts

AFP · 13 Sep 2008, 14:53

Published: 13 Sep 2008 14:53 GMT+02:00

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The European Union has long debated the merits of allowing such reduced value added tax rates, but efforts to change existing rules have stalled in the face of resistance, mainly from Germany but also from Austria and Denmark.

"It's difficult" to overcome the differences, said Belgian Finance Minister Didier Reynders as he arrived for a meeting with his EU counterparts in the southern French city of Nice.

"But I'm sure that it is important (to reduce rates) because there are some sectors with a very important capacity to give more jobs to the people, like in the restaurants. Why not reduce rates?" he added.

"We have expressed a certain degree of scepticism," said Austrian Finance Minister Wilhelm Molterer said. "We have doubts that consumers get the benefits of the tax cuts."

Currently, EU governments can only temporarily apply a reduced VAT rate as low as 5 percent on products or services from a list under strict rules. Normally EU countries cannot apply a VAT rate of less than 15 percent in order to avoid big price discrepancies across what is supposed to be a common market.

Much to Berlin's discontent, the European Commission weighed into the debate about VAT in July by proposing to make it easier to apply reduced rates in a greater number of labour-intensive or locally supplied services than currently allowed.

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Changing EU tax rules requires the unanimous support of all 27 EU member states.

During the debate in Nice, German Finance Minister Peer Steinbrueck said there were still too many open questions about the merits of targeted reduced rates to expand it to more services and products, according to one official.

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