Germans and Danes are further against the Czech exemption for lower VAT

Brussels - The extension of the exception for a reduced VAT rate on housing, which expires this year in the Czech Republic, remains elusive. The European Commission proposes that Czechs could tax new housing at a reduced rate until the end of 2010. This would prevent a tax increase to the basic nineteen percent VAT rate, which is currently planned for January 1, 2008. Germany and Denmark continue to oppose the extension of the exception. EU finance ministers will discuss the entire issue on Tuesday.
    The Czech Republic and other countries advocating for the extension, such as Poland and Hungary, must convince all 27 EU member states to agree. In tax matters, unanimous consent is necessary within the Union. Without the agreement from Germany and Denmark, the extension is not possible. However, according to diplomatic sources, a decision will not be made on Tuesday but rather at the EU finance ministers' meeting in December.
    Some ministers, including Czech Finance Minister Miroslav Kalousek, will still attempt to address the concerns of Germany and Denmark now. Both countries have no objections to Czechs having three more years of cheaper housing, but they are troubled by the overall approach to tax exceptions in the Union. Germany wants to harmonize the VAT system in the Union, which is currently full of exceptions, quickly. Meanwhile, Denmark traditionally has a negative view of exceptions, as they have a single tax rate of 25 percent.
    Currently, the reduced VAT rate in the Czech Republic is five percent. Next year it will rise to nine percent.
    However, the question of the reduced VAT rate will not be the only issue that ministers will address in the tax area. They are expected to disagree with the European Commission's proposal, which plans to introduce a car tax based on the amount of carbon dioxide emissions produced by individual vehicles.
    Countries, including the Czech Republic, are concerned that the volume of emissions is only clear for cars manufactured after 2004. For older vehicles, it is more challenging to determine the emissions, which could lead to several complications. Thus, the entire proposal is already doomed to failure.
    One of the main issues that ministers will discuss is the financing of the European navigation system Galileo. States will again attempt to find the 2.4 billion euros needed to complete one of the most ambitious EU projects. Here too, however, a final decision will be made only in December.