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Review of existing legislation on VAT reduced rates

Objectives of the consultation

The Commission in December 2011 adopted a Communication on the future of VAT that set out the fundamental characteristics that must underlie the new VAT regime, and priority actions needed to create a simpler, more efficient and more robust VAT system in the EU.

One of the priority actions was a review of the current VAT rates structure, based on the following guiding principles:

  • Abolition of those reduced rates which constitute an obstacle to the proper functioning of the internal market. Reduced rates justified in the past can have distorting effects today because the economic, business and legal environments have changed in the meantime;
  • Abolition of reduced rates on goods and services whose consumption is discouraged by other EU policies. This could notably be the case for goods and services harmful to the environment, health and welfare;
  • Similar goods and services should be subject to the same VAT rate and progress in technology should be taken into account in this respect, so that the challenge of convergence between the on-line and the physical environment is addressed.

The Commission made a first evaluation of the current VAT rates structure in the light of the above three guiding principles and this consultation sought the opinion of stakeholders in relation to the questions raised in the consultation document. The consultation closed on 4 January 2013.

Supporting papers

To download the consultation document please follow the link below.

CIBSE Response

CIBSE agrees with the Commission paper that there is a need to address the social impact of higher VAT on the fuel poor and socially vulnerable, but believes that the VAT rate for energy consumption should not be kept low solely to protect these groups, and alternative support mechanisms should be employed. On economic grounds consumption should be taxed more highly than energy efficiency measures in order to incentivise investment in energy saving measures. CIBSE believes that this approach is also consistent with the proposals for reform of the energy taxation directive.

To read the full CIBSE response please follow the link below.

Results of the consultation and next steps

The Commission published a summary report of responses to this consultation on Review of VAT rates on 12 April 2013. To download the repot please follow the link below.