- Reforms are part of EU VAT Action Plan announced today
- Proposals may allow UK to set 0% rate on renewable energy products by 2017
- Labour MEPs call on George Osborne to maintain 5% rate until it can be scrapped
Labour MEPs have called for George Osborne to scrap the 5% rate of VAT on renewable energy. Under proposals announced today by the European Commission, the UK government would be in a position to set a 0% rate on key products, including sanitary products and renewable energy.
The VAT Action Plan offers two proposals to the European Council to reform VAT in the EU. The first proposal would allow the UK to push for renewable energy products to be added to the current list of exempted products. The second proposal gives the UK power to abolish the list completely and set its own rate of VAT, including a level of 0%.
Current EU law means that the UK can’t set a rate below 5% on certain products; however renewables are not currently on the exemption list, leaving the current 5% rate in convention of European law. This has raised concerns that the government could raise VAT on renewables to 20% as early as August.
Labour MPs in Westminster have submitted an amendment to the finance bill that will be supported by the government. The amendment allows the government room to maintain the current rate of VAT on renewable energy.
Anneliese Dodds MEP said:
“The announcement today paves the way for George Osborne to scrap both the Solar Tax and the Tampon Tax as soon as 2017. This announcement is testament to the hard work of campaigners here in the UK and those working to reform the EU from within.
“It is crucial that George Osborne resists the temptation to increase VAT on renewables to 20% in the time before these new rules come into place. He must at the very least assure the UK renewable energy market that he will offset any rise in VAT with appropriate compensation.”
Theresa Griffin added:
"This government's record on climate change has been wholly inadequate and includes cuts of over £1bn to carbon capture and storage. Osborne has the opportunity to reduce tax on solar panels and support efforts to reduce climate change.
"Reducing VAT on solar panels will help incentivise industry and consumers to produce and purchase at lower costs. Right now the government is not on track to meet its 15% renewable energy target by 2020. This Labour amendment reaffirms our commitment to tackle climate change and support industry."