Polish Railways VAT burden threatens its EU subsidies

Before then it benefited from a 0% VAT rate applied to investments financed by the EU. After joining the EU, PKP PLK was obliged to abide by EU VAT rules which apply a 22% VAT rate. This in turn caused delays and finally stalled the payment of VAT to PKP PLK's subcontractors because PKP PLK simply could not afford it. The whole amount of overdue VAT has not been made public, but it certainly exceeds zł.15 million. According to the rules of granting EU subsidies, if PKP PLK does not clear its backlog of overdue payments, further funding will not be forthcoming. PKP PLK has planned to spend zł.3.6-4 billion in 2007. The only solution seems to restructure the company, but the sums are high so the program will be a long hard haul. (Puls Biznesu, p. 6) J.L.