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The leaders of the EU-27, who participated in the EU summit, said they would agree to consider the proposal by France and the United Kingdom to reduce the value-added tax on certain environmentally friendly products, including energy-saving lamps and insulation materials.
Initially, the proposal to change EU tax rules proposed by British Prime Minister Brown and French President Nicolas Sarkozy in July 2007 could not escape the fate of failure due to the lack of support from other EU member states. The EU summit statement released on March 14, 2008 made a study by the European Commission on whether economic instruments including VAT contribute to the promotion of environmentally friendly products and energy-saving materials. This shows that Brown's high-intensity lobbying activities against leaders of other EU member states have already worked.
Brown proposes to reduce the VAT on cars, insulation, energy-saving lamps and energy-efficient household goods with carbon dioxide reduction devices from the current 15% tax rate to 5%.
The above-mentioned initiative of the EU summit was put forward in the context of the commitment of EU member states to cut greenhouse gas emissions and fight global warming. But the real test will come when the European Commission submitted a new VAT scheme to support a significant reduction in VAT in the summer of 2008. The European Commission will then ask the 27 member states of the European Union to support the VAT reduction plan without objection. However, any change in the VAT rate across the EU will be a very sensitive issue, as a significant number of EU member states are concerned that this move will put a large amount of VAT-based revenue to the forefront.
Another issue will be to choose which environmentally friendly products and energy-saving materials are the subject of tax cuts. Some people think that the static tax reduction list will not work very well, because science and technology are advancing so fast, today's energy-saving and environmentally friendly products will not be tomorrow.
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