The UK’s coalition government is prepared to fight an EU ruling that would increase tax on energy efficiency products from 5 percent to 20 percent.
The BBC reports that value added tax (VAT) in the UK was reduced to 5 percent as a method of improving fuel poverty, reducing carbon emissions (don’t forget the carbon emission targets the EU has imposed by 2020), and as a way to lessen the strain on businesses — making room for additional jobs.
However, after a long battle between green advocacy groups and the government which put the tax relief in place, it seems the effort is going to waste –as the European Commission has decreed otherwise.
The Commission says that the tax relief on energy saving products is in breach of the VAT directive, and therefore even though it goes against the EC’s desire to cut carbon emissions, sorry folks, it’s going back up to 20 percent.
Reduced VAT rates are admissible in the UK under a number of areas, including water, food, restaurant service, children’s clothing and energy itself — but now, no product which saves energy is allowed. In the basic world of commerce, this will raise the price of such items — and it’s likely consumers are not going to find that attractive.
Credit where credit is due — the UK government has been raised from its slumber to snap back at the EC, calling the ruling “irrational” and vowing to see the Commission in court. Going further, Climate Change Minister Greg Barker has stepped into the Twitterverse to start a campaign against the ruling.
However, some green groups remain suspicious, as the government is notorious for fighting against environmental causes in the past. Keith Allott from WWF told the BBC:
“On this issue the government is clearly in the right. There are many barriers to energy efficiency so reducing the tax is a no-brainer.
But it’s ironic in the context that the UK government has been stone-walling on key provisions in the energy efficiency directive.”
Image credit: Dennis Skley