Construction tax agreement apparently clears the way for closing EU chapter

The European Commission (EC) has said it has completed negotiations with Poland on the taxation chapter of European Union (EU) entry negotiations. The announcement comes after the government appeared to accept an increase in the VAT rate on construction materials, from 7% to 22%, effective from the beginning of 2004. However, several ways of lowering the tax appear to have been left open. Head of the Polish Industrial Commercial Chamber (PIPH) Stefan Nawrocki said he hoped for a reopening of negotiations so that Poland could gain a transitional period for introducing the higher tax, similar to the five years granted to the Czech Republic. Anonymous EU officials and Polish diplomats quoted by Gazeta Wyborcza indicated Poland may achieve a 7% rate without changing its official negotiating stance, by making use of the category of "social purpose constructions", for which the EU accepts lower tax rates. Since the term itself is not precisely defined, almost any building constructed in Poland could belong to this category. (Rzeczpo spolita, p. B1; Gazeta Wyborcza, p. 21) M.K