Tax Policy Key to New European Green Deal

The President of the European Commission Ursula von der Leyen presented her ambitious climate-change related policy proposal ‘New Green Deal’, under which every aspect of the EU economy will be revaluated to address the shortcomings of the European framework, which are compounded by the climate emergency. The European leaders endorsed the policy goal of making Europe a climate-neutral by 2050, with a dissenting opinion from Poland could not commit to this goal, as a result of which the EU leaders will revaluate the matter in June 2020.

As part of the proposed plan to deliver the Green Deal, instruments such industrial policy, infrastructure, transportation, agriculture, construction, taxation and social policy will be engaged.

On the taxation policy front, the EU intends to use tax reforms to absorb climate-policy related shocks aiming to facilitate a just transition to a greener economy, specifically by sending the right pricing signals and incentives to producers, users and consumers. In addition to revision of the Energy Taxation Directive (by qualified majority voting, if necessary), the European Green Deal relies on removing subsidies for fossil fuels and shifting the tax burden from labour to pollution. In order for Member states to be able to rely on targeted VAT rates to reflect the green ambitions, for example to support organic fruit and vegetables, a rapid adoption of Commission’s proposal on VAT rates is encouraged.

The State aid guidelines concerning the environmental goals and energy will be revised by 2021 to facilitate a meaningful transition to climate neutrality by 2050, specifically by phasing out fossil fuels and encouraging clean energy sources.

Ref.: CFE’s Tax Top 5 – 16 December 2019

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