Cuts to VAT on fuel illegal under EU law, commission says
Cuts to value added tax (VAT) on fuel would not comply with European Union law, the European Commission said on Wednesday, as governments across Europe attempt to combat spiking fuel prices amid the ongoing conflict in the Middle East.
“While we fully understand the need to support citizens during these difficult times, it is important to note that the EU VAT directive does not provide for the possibility to apply a reduced rate on supplies of fuel,” a commission spokesman said.
He added that it “is possible for member states to reduce excise duties for fuel”, with this being the avenue followed by the Cypriot government, which reduced the fuel consumption tax to 8.33 cents per litre, effective as of Wednesday until the end of June.
With the governments of Spain and Poland, meanwhile, having announced their intentions to reduce their domestic rates of VAT on fuel, the spokesman confirmed that letters have been sent from the commission to both Madrid and Warsaw.
“In the letter, we recalled to the national authorities that the EU VAT directive does not provide for the possibility to apply a reduced rate on supplies of fuel,” he said.
In addition to the reduced fuel consumption tax rate, the government also announced that “green taxes” on fuel, which had been set to raise the retail price of fuel by nine cents per litre, will not be implemented.
In the north, which is not subject to EU law, VAT on fuel has set at zero since March 19, with that tax one of six fuel-related taxes zeroed by the Turkish Cypriot authorities in recent weeks in an attempt to stem rising energy prices.
At present, fuel tankers docking in the north are not subject to any docking fees, while no customs duty is paid on the fuel they import, and fuel retailers’ contributions to the north’s agricultural insurance fund and tourism incentive fund have also been zeroed.
In addition, municipal weighing fees – a tax paid by businesses based on the weight of goods sold – have been zeroed for fuel.