Commission’s VAT Proposals Could Support Circular Economy Goals – FEAD

The European Federation of Waste Management and Environmental services (FEAD) says the European Commission’s proposals on VAT is an “excellent supportive measure to realise circular economy’s goals and benefits”.

The newly proposed rules by the European Commission aim to give member states more flexibility to set Value Added Tax (VAT) (see below).

FEAD published a statement yesterday (7 February) that said its members consider the VAT rates as a useful instrument to pursue EU’s political, economic and environmental objectives.

“FEAD strongly believes that fiscal incentives to this regard should also be considered, such as lower or zero VAT rates on products with recycled content”

“Whereas the European Commission is continuing to explore several routes to boost the demand of recyclates, FEAD strongly believes that fiscal incentives to this regard should also be considered, such as lower or zero VAT rates on products with recycled content,” it said.

The new proposals on VAT aim to enable member states to put in place reduced or zero VAT rates for their selected categories of products.

FEAD said it advocates such a choice to be left to member states, allowing products with recycled content to be possibly selected amongst those benefiting from reduced VAT rates.

Now it will be up to the Council acting unanimously to give the green light to the Commission’s proposals, with the perspective that reduced VAT on targeted products or services can be in the future an excellent supportive measure to help realising circular economy’s goals and benefits, by promoting sustainable products and raising consumers’ awareness.

What is the Commission proposing?

Equal treatment of Member States in setting VAT rates:

  • At the moment, VAT rules agreed by all Member States allow for two distinct categories of products to benefit from a reduced VAT rate of as low as 5% in each country. A number of Member States also apply specific derogations for further reduced rates.
  • The proposed definitive regime is based on taxation at destination instead of origin, as initially envisaged. Restrictive rules on the application of rates are therefore no longer essential to avoid distortion of competition.
  •  The new harmonised and flexible rules proposed will enable all Member States, in addition to the two reduced rates of a minimum of 5% and one 0% rate, to apply a third reduced rate of between 0% and 5%.
  • The current list of goods and services to which reduced rates can be applied will be abolished and replaced by a new list of products to which the standard rate of minimum 15% must always be applied. This list will include products such as weapons, alcoholic beverages, gambling and tobacco.
  • To safeguard public revenues, Member States must also ensure that the weighted average of all VAT rates applied is at least 12%.

For more on the measure CLICK HERE

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