The European Union's tax rules were in chaos today as Poland held out against a VAT compromise by all other countries.
Finance Minister Karl-Heinz Grasser of Austria, which holds the rotating EU presidency, told reporters in Berlin that Poland's decision left the 25-member bloc in a "very serious situation" but that he still hoped a solution was possible.
All 24 other EU countries support a proposal by Vienna to extend by five years an arrangement that expired last year, allowing VAT on selected services in several member states to be kept below the minimum rate of 15 per cent.
But it requires unanimity to pass.
Warsaw's refusal to accept the value-added tax deal highlights tensions between old members of the EU and the mostly ex-communist and poorer states which joined in 2004, as well as the difficulties of decision-making in the enlarged bloc.
Poland is sticking to its objection to an EU agreement to keep lower VAT on some labour-intensive services, such as home repairs or hairdressing.
Diplomats said talks between EU governments were continuing and Poland had until the end of today to change its mind before the EU executive commission meets on Wednesday.
That is when it will have to tell the nine "old" EU member states that apply reduced VAT levies to hike the tax to at least 15 per cent, if Poland continues to object.
The French finance ministry said Austria was intensifying contacts with Poland.