RIGA - Latvian government officials may block proposals for reduced value-added tax rates at an upcoming meeting of EU economy and finance ministers if the country's proposal for a lower rate on heating is not approved.
Finance Minister Oskars Spurdzins told the press that a proposal by the United Kingdom, which held the rotating presidency in the second-half of last year, for reduced VAT rates also included a lower tax on heating services until 2016. However, he added that the current Austrian presidency is proposing to solve only problems of older EU member states by imposing a reduced VAT rate until 2010 on labor-intensive sectors.
This, said Spurdzins, does not solve Latvia's problems.
The finance minister said Latvia might make a concession if the reduced VAT rate could be imposed on heating services until the end of 2010.
If Latvia's opinion is not taken into account, Latvia will block the issue, thus preventing old member states from solving their problems.
Spurdzins also said that reduced VAT rates on heating would not influence competitiveness of old EU member states, as some of the countries, such as Spain and Greece, have no such problem at all.
EU finance and economics ministers were due to discuss the issues of reduced VAT on Jan. 24. Previously they discussed the issue but did not reach an agreement.
An EU directive requires member states to apply the basic VAT rate on heating supplies, which in Latvia is 18 percent. The provision has been put in place to ensure equal conditions for operations on the EU energy market.
Latvia currently is not imposing VAT on heating services, as it would be too hard for the country's low-income population and would push inflation, already the highest in Europe, even further up.
