The EU Paves the Way for Cheaper Internet, Bicycles, and Other Forms of Transportation

On Tuesday, European Union finance ministers decided to amend EU laws to reduce the value-added tax (VAT) on goods and services related to climate change, health care, and make the EU more digitally equipped.

At the same time, they agreed to phase out some of the current lower VAT rates on fossil fuels and other items that contribute to greenhouse gas emissions by 2030, in order to enable the 27-nation bloc to meet its goal of producing no CO2 in net terms by 2050.

Except for a list of exemptions, where the lowered VAT rate must be at least 5%, the EU’s basic minimum VAT rate on all products and services is 15%. The actual tax rates imposed differ between EU countries and products. Special prices for specific products have also been agreed upon by some governments.

To allow small-scale farmers more time to adapt, the ministers agreed to extend the reduced VAT rates and exemptions for chemical fertilizers and pesticides until January 1, 2032.

The agreement will allow governments to slash VAT rates on products and services that make the economy more digitally adaptable, including internet access and live streaming of cultural and sporting events.

Aware of the COVID-19 pandemic’s experience, the ministers agreed to include health protective equipment such as face masks and other medical gear, as well as products considered important for the disabled, to the list of goods eligible for lower VAT rates.

Lower VAT will be available on products like bicycles, ecological heating systems, and solar panels placed in private residences and public buildings that are linked to combating climate change.

After the European Parliament is consulted on the deal, which might take until March 2022, lower rates will be possible.