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6 July 20232 minute read

Reduced VAT rates for recycled products

European Union

On 12 June 2023 the Council of the European Union issued a proposal for the introduction of a reduced value-added tax (VAT) rate specifically targeted at products composed of recycled materials.

The primary objective behind this proposal is to actively promote recycling and encourage the utilisation of secondary raw materials. It falls squarely within the Council's wider strategic vision of transitioning towards a circular economy, where the principles of environmental protection, reduced dependence on primary resources, and economic benefits in the form of job creation take centre stage.

By introducing a reduced VAT rate specifically applicable to products incorporating recycled content, the Council aims to incentivise manufacturers, consumers, and the overall supply chain to prioritise the use of recycled materials. This financial incentive is anticipated to play a central role in steering market dynamics towards a more sustainable and resource-efficient model. The proposal is also aimed at fostering a more conducive environment for the emergence of innovative recycling technologies, processes, and business models.

 

Key takeaway

The Council's proposal to introduce a reduced VAT rate for recycled products represents a significant step towards the realisation of a circular economy. By combining economic incentives with environmental objectives, this initiative seeks to foster sustainable consumption patterns, reduce waste generation, and pave the way for a more sustainable future.

Businesses should look out for further developments as the use of taxation to combat climate change is becoming a trend. This will benefit the final consumer as bearing the cost of the VAT, but also businesses in being able to offer goods at lower prices and increase sales by promoting their adherence to sustainability objectives.

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