Poland's rejection of a VAT deal that is agreed upon by all the other 24 members of the European Union (EU) is putting the 25-nation bloc into a legal disarray.

Polish Finance Minister Zyta Gilowska said Tuesday that Warsaw would not back the proposal, just one day before the deadline for a formal deal.

The agreement, brokered last week by Austria, the current EU presidency, would have allowed EU member states to continue to apply VAT lower that the minimum of 15 percent to certain labor- intensive sectors, such as house repairs, window cleaning, hair dressing and domestic work.

The previous scheme agreed in 2003 expired on Dec. 31, 2005, leaving nine countries in breach of EU tax regulations.

Poland wants to extend until 2007 the low VAT scheme to include food, books and construction in line with existing VAT waivers it negotiated as part of its accession to the EU.

But Poland's position met opposition of Germany and several other countries.

France, which proposed lower VAT on restaurant visits, backed off in order to make a deal.

If Poland cannot be persuaded to back the proposal, EU commissioner for taxation and customs union, Laszlo Kovacs, will be forced to ask the nine member states currently applying reduced rates on labour intensive services to start to apply the standard minimum rate of 15 percent.

The difficulty is that the change of VAT rate needs amendment to national legislation, which cannot be done overnight.

The nine countries with low VAT rates are: Belgium, Britain, France, Greece, Italy, Luxembourg, the Netherlands, Portugal and Spain.

"VAT is levied according to national laws, so the nine countries would have to amend their legislation accordingly," Kovacs' spokeswoman Maria Assimakopoulou said.

The commission still hopes that Warsaw will give in.

"If we have this agreement, everybody is going to gain, including Poland. And if we don't have this agreement, everybody will lose including Poland," said Assimakopoulou.

The Czech Republic and Cyprus, which threatened to veto the agreement, changed their minds over the weekend.

Source: Xinhua