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The European Commission is taking the UK to court over its reduced VAT rate on energy-saving products, it announced today.
It said the UK’s defence of the VAT discount – it charges 5 per cent instead of the standard 20 per cent – was “not satisfactory” and referred the matter to the EU Court of Justice.
Under EU VAT rules, discounts are only allowed for social policy reasons, not environmental reasons.
In a statement, the Commission said: “Member States themselves unanimously decided on the list of goods and services that could benefit from a reduced VAT rate, and they also insisted that this list be strictly applied, with no room for manoeuvre or interpretation. This is important to prevent competitive distortions in the Single Market and to ensure a fair and level playing field between all Member States.”
It added that economic studies showed reduced VAT rates “are often not the best way to achieve policy objectives” and direct subsidies could be more efficient.
If the Commission’s case succeeds, it will put costs up for Green Deal measures. That makes it harder to meet the “Golden Rule” that costs must not exceed savings from lower energy bills.
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