- 11th September 2012
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The UK government is set to fight an EU ruling dictating that VAT on energy efficient products must be set at 20 per cent. The current level of VAT on energy saving products is 5 per cent, which was reduced by the government in order to cut fuel poverty, encourage energy saving, reduce carbon emissions and create jobs.
The EU argues that the current set up breaches a directive which allows for reduced VAT on certain products – including energy itself – but not on energy saving. Opponents including several green groups argued that it is nonsensical to tax energy saving more than energy use, which incurs a VAT rate of just five per cent.
This is despite the fact that the EU commission’s policy is to improve energy efficiency and cut carbon emissions. The UK government says the VAT ruling is irrational and has confirmed it intends to challenge the ruling in the courts.
The Climate Change Minister Greg Barker has started a Twitter campaign on the issue. He told BBC News: “The Coalition’s approach to energy efficiency is good for the environment and good for growth. Rather than obstruct us Europe should follow our example!”
Keith Allott from WWF told BBC News: “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.”