EU finance ministers meeting in Brussels yesterday once again failed to agree reform of the way VAT is applied in the EU, after another veto by Luxembourg.
The Grand Duchy is refusing to agree to a proposal to charge VAT on telecoms and electronic services in the country where the consumer lives, rather than where the supplier is based.
Having the lowest VAT rate in the EU - 15 per cent - means that the tiny country has attracted major international e-commerce firms such as AOL, eBay, Amazon and iTunes.
Luxembourg prime minister Jean-Claude Juncker, who also doubles as the country's finance minister, has previously said that reforming the rules would see the country losing about €220 million in revenues.
Ministers also failed to reach a deal on reduced VAT in new member states: the Czech Republic, Cyprus, Malta, Poland and Slovenia.
These rates, such as the 5 per cent rate on restaurant services in Malta, are due to expire at the end of the year.
The five are pushing to keep the electorate-friendly levies but this was opposed by Germany and Denmark.
Meanwhile, Europe's troubled satellite navigation system, Galileo, continues to suffer from a lack of agreement over funds.
The European Commission has proposed using public money from the EU's farm and administration coffers to help plug the hole after a private consortium failed to agree a commercial proposition.
But Germany objected yesterday, arguing that money should be taken from funds meant for the European Space Agency. "Germany put forward that point of view, but was alone in doing so. There was no support from other member states," said Portuguese finance minister Fernando Teixeira dos Santos, chair of the talks.
