UK alone in tax penalties on energy saving

The UK is alone among the eleven northern EC countries in having a higher rate of VAT on energy-saving materials than on domestic energy use, a parliamentary answer has revealed. Treasury Ministers insist there are obstacles in EC law to ending the anomaly - but they took the opposite tack in Opposition.

The preference given to energy consumption over energy saving is a long-standing distortion of the UK's tax system. Energy-saving goods are charged at the standard rate of 17.5%. The previous Government's attempt to correct the anomaly was aborted in response to public protests, and one of Labour's first acts in power was to cut VAT on domestic fuel and power from 8% to 5%.

This distortion is absent from all ten other northern EC states,

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