At the EcoFin Council meeting yesterday in Luxembourg, Luxembourg's Minister of Treasury and Budget voted against the planned VAT reform.
According to the proposal, VAT on international services would have been paid in the country where the service is being provided, not, as the incumbent regulation orders, in the country where the service providing company is registered. Luxembourg's nay effectively vetoed the proposal, as EU regulations prescribe unanimous decisions on community tax issues. The new practice would have caused Luxembourg a loss of 1% of the country's GDP.
In an other vote, the EU's Finance Ministers terminated penalty procedures against Germany, Malta and Greece which were triggered earlier by too high deficits in these countries. Also, they approved the accession of Cyprus and Malta to the Economy and Monetary Union, so the two countries will adopt the euro on January 1, 2008. The Ministers also discussed the issue of taking joint actions against VAT evaders and the possibility of introducing a system in which VAT would be paid by only the end consumers. (Napi Gazdaság , Magyar Hírlap)