Rome unlikely to cut a deal on flowers tax

Date: 30/05/1996

By Fiona McHugh

FINANCE ministers will try once again to settle a long-running dispute over tax rates on cut flowers. But, unmoved by an Italian compromise deal, they are unlikely to fare any better next week than they have in the past.

Far from inspiring love, tulips, roses and daffodils have provoked furious rows in EU circles.

Diplomats predict that Rome will fail to win support at a meeting of EU finance ministers next Monday (3 June) for its compromise plan to allow different VAT rates to exist within the Union until 2000.

While those countries which apply reduced rates are likely to be happy with the proposed extension, those which apply the full rate will certainly not. “The political situation is very tricky,” explained one diplomat.

Although member states agreed in 1992 to impose full VAT rates on horticultural products from the beginning of 1995, several have since failed to deliver on their promise.

Germany, Greece, Spain, France, the Netherlands, Austria and Luxembourg continue to impose a reduced rate of between 6-7&percent; on cut flowers, while the rest have applied the full rate as agreed.

The resulting divergence in rates is causing distortions in the market by giving flower growers in low-rate countries an unfair competitive edge over their counterparts in high-rate states.

It has also led to a surge in illegal flower trafficking, with Belgian shopkeepers dodging their country's high taxes (21&percent;) by buying blossoms in neighbouring Netherlands.

Earlier this year, Belgian Finance Minister Philippe Maystadt challenged the Commission to bring disobedient member states into line, saying it had no choice but to get tough with lawbreakers. The Commission has issued a warning to the seven governments involved, but has so far failed to carry out its threat to take them to the European Court of Justice.