Malta 'can reclaim VAT' on EU projects'

Malta will be able to reclaim VAT on structural and cohesion fund projects under fresh proposals for the 2007-2013 EU budget presented yesterday by the UK presidency.

Under the proposed financial package, which will be discussed at the EU council summit starting today, Malta's EU budget allocation stands virtually untouched when compared to what had been proposed by the Luxembourg presidency.

The VAT refund has nothing to do with the controversial rebate-for-farm-subsidies issue which risks stalling financial perspectives discussions a second time since the failure of the EU council summit in June.

On December 5, the UK had proposed that the rate of national co-financing forked out by a member state goes down from 20 per cent to 15 per cent. This could boost Malta's budgetary cash flow as the EU would actually fork out a greater share of the projects.

Another proposal in Malta's favour had been an allowance for countries to spend allocated funding over three years rather than two.

Albeit a technical detail which is "not a quantifiable gain" in the revised proposals, the VAT refund is indeed "very helpful" for Malta when seen with rest of the December 5 package, the British High Commissioner to Malta, Vincent Fean, told a press conference yesterday.

Earlier, British Foreign Secretary Jack Straw published new proposals which saw a minor increase to €849.3 billion in overall spending - up €2.5 billion from the overall spending proposed by Mr Straw on December 5. The figure represents 1.03 per cent of EU output.

The UK's proposals are based on "tough budget discipline", even though the revised plan sees an extra €1.2 billion going to Poland, €140 million to Hungary, an added €200 million to the Czech Republic, €48 million to Estonia and €82 million to Latvia.

The application of structural cohesion funding is expected to be extended to Greece and Portugal among the "old" member states.

An extra €500 million are set for Spain under transitional cohesion funding till 2013.

The UK's original proposal had come under heavy fire by the European Commission and seven new member states which saw their structural and cohesion allocations slashed by 8.5 per cent.

Speaking to journalists at the British High Commission yesterday evening, Sir Vincent was categorical on comparisons made between the UK package and the proposals tabled by Jean Claude Juncker's government in June 2005: "The Luxembourg package does not exist because it wasn't agreed upon," he said.

Sir Vincent said the revised package offers additional rural development funds to Finland, Ireland, Portugal, Sweden and Austria, and also helps Sweden and the Netherlands, two of the countries with the highest net contributions to the EU budget, improve their net positions.

The new proposals also commit the council to increase spending on research and development by 75 per cent.

"If agreed, the budget will represent a historic shift in spending from the 15 'old' member states to the 10 new states plus Bulgaria and Romania," he said.

The December 5 offer of €8 billion for enlargement costs remained unchanged.

Britain made it clear there would be no fundamental change in the rebate it receives without a fundamental reform of the common agricultural policy.