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To: John Vosilla who wrote (51102)	1/24/2006 6:43:11 AM
From: shades	Respond to of 110194

Chirac promised during his 2002 election campaign to get the E.U. to approve a cut to restaurant tax of nearly 20%. Germany has led opposition to the VAT waivers, arguing it would deplete government coffers at a time of budget crises. DJ UDPATE: Ministers Seek A Deal To Cut VAT On Home Repairs (Updates a 0930 GMT story with comments from Dutch government spokesman) BRUSSELS (Dow Jones)--European finance ministers were Tuesday searching for a last-minute deal to cut value-added tax rates on home repairs. Prospects for a limited deal were in sight after French President Jacques Chirac Monday evening seemed to drop his demand that the VAT cuts be extended to include restaurants. This removed the main obstacle to an agreement, though it still wasn't clear whether the 25 ministers meeting Tuesday would reach the unanimity needed for a deal. "If we don't find a solution today, it would be the final word on reduced rates because the (European) Commission then would have to act," said Austrian Finance Minister Karl-Heinz Grasser, who is chairing the meeting. "Everyone should think twice before vetoing a compromise proposal today." Austria proposed a compromise last Friday to end Europe's long-running VAT battle, suggesting countries be allowed to extend waivers on construction and renovation businesses until 2011 and putting the tax question for other businesses before a special committee. A spokesman for the Dutch government said after finance ministers began their meeting that he expected at least a partial and temporary compromise to come from Tuesday's meeting. The Dutch, who support the Austrian proposal, want a permanent solution to be reached on the VAT question, but the spokesman conceded that it was unlikely it would come Tuesday. "For us, we want a permanent deal so this issue doesn't constantly have to be discussed every few years," said the spokesman. More likely, he said, is that an extension of the current arrangements would be agreed, though he cautioned that it might not be as long as the five years the Austrians are advocating. The Netherland is one of nine countries that presently exempt some service sectors from the European Union's minimum 15% VAT rates. Originally, diplomats said the Austrian plan had little chance of passing because of French opposition. Chirac promised during his 2002 election campaign to get the E.U. to approve a cut to restaurant tax of nearly 20%. Germany has led opposition to the VAT waivers, arguing it would deplete government coffers at a time of budget crises. At a press conference Monday evening with German Chancellor Angela Merkel, however, Chirac acknowledged that he didn't expect finance minister approval of his restaurant VAT demand. Instead, all he now hoped was that the possibility be kept open for a future drop in restaurant tax. The French president retreated because otherwise the present cuts on home repairs and other services would have been jeapordized. European Taxation Commissioner Laszlo Kovacs has warned he will take the countries with VAT waivers to court if the finance ministers don't get a deal Tuesday. And yet, all E.U. tax matters must be receive approval from all 25 E.U. countries. "It is a question of unanimity, which is a very difficult question," acknowledged Spanish Finance Minister Pedro Solbes. Other countries, principally East Europeans, have raised objections to the Austrian proposal. They want the VAT extensions to be extended to all construction work, not just home repairs. -By William Echikson and Corey Boles,Dow Jones Newswires;32-2-741-1482; william.echikson@dowjones.com