Question for written answer E-002027/2023 to the Commission from Marek Belka (S&D).
Recycling and transitioning to a circular economy can promote sustainable business practices and significantly contribute to the EU’s environmental goals. One way of supporting recycling and the circular economy is through fiscal measures, such as by introducing a reduced value added tax (VAT) rate for recycled or recyclable products, as proposed by the Czech delegation at the Environment Council meeting of 20 June 2023. However, the VAT Directive[1] as it stands does not provide for such a possibility. Therefore, in light of the Czech delegation’s proposal:
1. Does the Commission envisage a revision of the VAT Directive to address this issue?
2. What potential risks and opportunities does it foresee in moving forward with the Czech proposal?
Answer given by Mr Gentiloni on behalf of the European Commission on 15.9.2023
In 2018, the Commission proposed to reform the system of value-added tax (VAT) rates and allow Member States to apply reduced rates to any goods or services, with the exception of certain goods and services that were explicitly listed in the legislation.
As recycled or recyclable products were not included in this list (often referred to as a ‘negative list’), they would have been eligible for reduced rates.
Ultimately, this approach was not accepted by the Council. Instead, the Council chose to update the existing list in Annex III to the VAT Directive of goods and services eligible for reduced rates (referred to as a ‘positive list’).
When agreeing on the content of this list, the Council decided against the inclusion of recycled or recyclable products, and therefore those products continue to be ineligible for reduced rates.
At the current juncture the Commission is not considering a new legislative initiative in this area. Future changes have to be looked at holistically, taking into account the principle of fiscal neutrality and lessons learnt, notably that the pass-on rate of any VAT reduction to consumers could be relatively low, and that there could be difficulties in the practical application of reduced rates, in particular as regards identifying the eligible products.
Source: European Parliament
