Commission plans VAT cuts for green goods

The European Commission plans to release a proposal that would enable Member States to reduce the amount of Value Added Tax (VAT) applied to greener products as a cost-effective means of promoting the production and use of energy-saving materials and energy-efficient appliances and equipment. The Commission’s tax and customs department has been drawing up draft proposals that would enable governments to apply for reduced VAT rates on a limited number of specified products. However, it seems unlikely that VAT rates on consumer products such as energy efficient appliances will be included, as the Commission fears this could lead to distortions in the EU market for certain cross-border goods. The final proposal is expected to be tabled in April 2009.