Gov’t source: Cyprus to back EU tax deal

NICOSIA (Reuters) – Cyprus will join the Czech Republic in backing an EU deal on sales tax, a government source said yesterday, leaving Poland the sole country holding out against the proposal. Austria, which holds the European Union’s rotating presidency, earlier this week proposed an agreement that would allow value-added tax (VAT) on selected services in several member states to be kept lower than EU norms. The Czechs, Poles and Cypriots refused to sign up, angering several longtime EU members and provoking thinly veiled threats of reprisals. The three argued that the Austrian proposals discriminate against the newcomers, which have cutoff dates to abolish tax breaks and meet higher rates in line with EU requirements. But Prague on Saturday confirmed it had dropped its opposition, saying it had clarified most of its concerns, and yesterday a source said Cyprus would follow suit. «We have responded to the Austrian minister of finance and stated that Cyprus will accept the compromise proposal,» a senior Cypriot Finance Ministry official told Reuters, speaking on condition of anonymity. «We said the new proposal was less favorable compared to the old one (proposed by the British presidency). Still, in the spirit of a constructive approach, we said that we are going to accept the compromise and see how the dialogue within the EU goes on this issue.» Austria gave the dissenters until yesterday to drop their opposition or come up with proposals to end the deadlock. But there was no word from Poland, entering three days of mourning after the roof of a packed exhibition hall in the southern city of Chorzow collapsed on Saturday, killing 66 people in the nation’s worst disaster in almost two decades. A government source had earlier said Warsaw told the Austrian presidency on Friday it did not like the new proposals and would not accept them in their present form. «At this moment I can’t say if any talks took place, or whether there will be any government information on this issue,» government spokesman Konrad Ciesiolkiewicz said. He said he was unaware of any attempts to push back the deadline for the deal because of the tragedy in Chorzow. Without the agreement of all 25 EU members, some old EU states would end up violating EU laws if they failed to increase VAT on services such as hairdressing or home repairs. An exception to keep them below the standard minimum rate of 15 percent expired in December.

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