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EU seeks tax compromises on beer, liquor, downloads

Banking

The European Union is pushing to end an impasse on tax laws including beer and liquor levies, value-added tax on internet downloads and limits on the products travelers can bring into the 25-nation area.

The European Commission, the EU's executive agency, has offered to scale back a proposed increase in taxes on beer, to soothe German and Czech concerns ahead a meeting of finance ministers in Brussels today. The Czech government will object to any boost, a newswire in the country reported today. The commission is also seeking a compromise between the UK and Eastern European countries on the value of products that people can carry into the EU, and on how VAT is applied across borders.
„After the proposal was sent, then I had some higher expectations,” Taxation and Customs Commissioner László Kovács said to reporters yesterday. „But I don't know, I have to wait for the reaction.” The commission September 8 proposed to lift the minimum levels that all EU countries much charge on beer, spirits and intermediate-strength products such as fortified wine, to reflect 31% inflation since the law took effect in 1993. There's no minimum on wine.

The Czech Republic and Germany -- the world's top two beer drinking countries by per capita consumption -- on November 7 rejected the initiative, which would have added about 1 euro cent to the price of a half-liter of lager. Most countries weren't affected because they already charge more than the minimum level. The EU can't pass tax laws without unanimous agreement, giving any single member a veto. Kovács is pushing a compromise 4.5% increase, reflecting inflation since 2004, when the Czech Republic and nine other countries joined the EU.
He said yesterday that would put Germany in the clear, without the need to raise its tax. The Czech Republic still opposes the plan, the Czech newswire CTK reported today, without citing anyone. Excise tax remains an issue on other alcoholic beverages. Finland, which holds the EU's rotating presidency until the end of the year, is pushing to raise the floor the full 31% on liquor, while the commission favors moving all categories together, Kovács said.

The smaller adjustment for intermediate products also would spare countries including Spain, the birthplace of sherry, and Portugal, the home of port, from having to raise taxes. On customs rules, the commission is seeking to find a compromise between the UK, which is seeking a higher allowance for travelers bringing in goods, and Eastern European countries, pushing to limit what people can bring in from cheaper shops in neighboring areas.
Kovács supports a proposal by Finnish mediators of €430 ($564) for airline passengers, and €300 for travelers over land. He said today that UK Chancellor of the Exchequer Gordon Brown, in a private conversation, „reacted in a rather positive way” to the differentiated limits. The commission will also seek an agreement to extend by two years the rules for charging value-added tax, or VAT, on software and other downloaded products from abroad, such as music from Apple Computer Inc's iTunes Web site. The current law requiring sellers to collect the tax on software and other goods delivered via the internet to individuals is scheduled to expire at the end of the year.
An attempt to make the electronic-commerce tax permanent failed earlier this year as finance ministers disagreed over a broader overhaul of VAT rules, which is still being debated. VAT is levied at 15% to 25% on most goods and services within the EU. The tax is payable in the country of consumption, leaving it to sellers to determine what rate to charge in some circumstances. (Bloomberg)

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