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Potential VAT rewards to benefit Circular Economy aims

9th February 2018

Cherry Whittaker

Last month (January 2018), The European Commission put forward new potential proposals regarding a VAT based incentive which could support SMEs and also publicise sustainable products containing recycled content

The aim of the proposals is to provide flexibility for Member states to set VAT rates and therefore, create an improved tax environment to assist SMEs with business growth. Companies will potentially be able to apply reduced or even zero VAT rates to their selected categories of products, instead of only a small amount of sectors/products as stated in the current EU VAT rules, which were agreed in 1992. 

In terms of supporting the realisation of the Circular Economy objectives and raising consumer awareness of its benefits, the proposed new VAT rules will help to do this by applying the same incentive to products containing recycled content and therefore, allow companies to reap the much-desired reward for manufacturing products with recycled content.

Despite the fact that the UK is leaving the EU, if the Council approve the Commission's VAT proposals then this may have clout as an example which the UK could also look to implement. The proposals provide positive groundwork for the development of a more circular economy and may be a beneficial alternative to a materials recycling fund.

Blue chip brands including Coca Cola have already begun utilsing recycled content within their products, therefore proving this process will likely enable significant competitive advantage for obligated producers under the packaging waste regulations who have the opportunity to do the same.

For more information and regular updates regarding the Circular Economy, check out our blog here