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EU executive quashes Britain’s green tax plan

The European Commission on Thursday quashed a British plan to cut rates of sales tax on green products to help save energy, saying there was not enough support among the bloc’s members nor enough proof it would work.

British Prime Minister Gordon Brown aired his idea to reporters on a train as he headed to a two-day summit of EU leaders that began on Thursday to discuss measures to combat climate change. Lower value-added tax on fridges, dishwashers, electronic goods, cleaning materials, lightbulbs and insulation could spur people to buy products that use less energy, Brown said. “You can do something by tax incenitives, by incentivising people to take the right steps and that’s why today I’m suggesting to the EU that... we reduce VAT on environmentally sensitive products,” Brown told Sky News television. “I think that could be a powerful lever for change,” Brown added.

The European Commission has sole right to propose changes to the VAT system but unanimity among the bloc’s 27 members is needed for proposals to become law. “We are informed that some member states, they do not accept this idea,” Commission President Jose Manuel Barroso told a news conference at the end of the summit’s first day. “We have to make an impact assessment of that proposal to see exactly if it can work,” Barroso said. “There we have some doubts,” he said, adding it was also unclear what would be the impact on tax revenue streams.

Britain along with France first put forward the idea of reduced VAT on green products in a letter to EU finance ministers last year but got nowhere. A top Commission official told reporters in January there was no convincing impact assessment on the issue, citing the example of a push bike as a green form of transport, but which is made of steel whose production affects the environment. A Commission legislative proposal to tax cars on how much a vehicle pollutes has made little progress among EU states. (Reuters)