While it is possible to reduce VAT on gas and electricity, this is not the case for fuel. To do this, the RN intends to request an exemption from the European Union.
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This is one of the RN’s flagship economic measures for the legislative elections. During the presentation of his program, Monday June 24, Jordan Bardella once again promised to reduce VAT on energy products (electricity, gas, fuel oil and fuels) from 20% to 5.5%, through a bill of amended finances. “It is perfectly possible to lower VAT on energy in Europe. Germany has done it, Poland has done it”declared the president of the National Rally.
While the gas bill is due to increase by nearly 12% on July 1, the RN promises to “protect the purchasing power of the French”. This reduction in VAT on energy was already supported by Marine Le Pen in 2022 and represents a cost for public finances estimated at 16.8 billion euros by Bercy, according to The Parisian. So, could the RN really keep its promise?
Questioned on Friday June 21 on RTL, RN deputy Jean-Philippe Tanguy detailed how the party intended to go about it. You will first need to request a “temporary exemption” from the European Commission to apply the measure “from this summer”. “There was a change in directive in 2022 which allows gas and electricity to be recognized as essential products (…) Where the negotiation is more difficult is on fuel”, admits the outgoing deputy for the 4th constituency of the Somme and economic expert of the RN. He spoke of the need to put in place a “balance of power”.
“What we want to explain to Brussels is that energy is a basic necessity.”
Jean-Philippe Tanguy, outgoing RN deputy for the Sommeon RTL, June 21
The European directive of November 2006 (PDF link) on VAT allows any Member State to apply a reduced rate of at least 5% “to supplies of natural gas, electricity and district heating”. It also sets out, in its Annex III, the list of goods and services which may benefit from this reduced rate, such as foodstuffs or water distribution. “The ban [d’appliquer une TVA réduite] is general, and the list opens permissions. Fuel is not included in the permissions“, specifies Guillaume Baticle, doctoral student in public law at the University of Picardie Jules Verne (UPJV) and legal fact-checking journalist at Surligneurs. As fuel is not mentioned in this annex, it is therefore illegal to lower its VAT beyond the rate “normal” of 15% set by this same directive.
Since then, this directive has evolved, in particular to deal with crisis situations. “It was modified in 2020, with the addition of masks and hydroalcoholic gels to the list of products eligible for reduced VAT, in the context of the Covid-19 pandemic”, notes the lawyer. Another directive from April 2022 revises that of 2006, establishing the possibility for Member States to exempt certain goods and services from VAT “covering basic needs”explains the European Commission.
The list of goods and services eligible for reduced rates is updated: it now includes “delivery electricity, district heating and district cooling and biogas”. According to Guillaume Baticle, the energy crisis caused by the war in Ukraine happened there. THE “natural gas and firewood” are also in the list, but until 2030. Thus, “the RN’s proposal [de baisser la TVA] on electricity and gas does not pose a problem”believes the doctoral student in law.
However, reductions and exemptions will no longer apply to products deemed “harmful to the environment” by 2030 for fossil fuels and by 2032 for pesticides and chemical fertilizers, specifies the new directive. Europe has set itself the objective, with the Green Deal, of reduce EU greenhouse gas emissions by 55% by 2030 and reach the carbon neutrality by 2050.
However, the RN is hopeful of winning its case, drawing inspiration from the Polish example. “Like Poland, we will have a temporary exemption. What is difficult is [d’obtenir] a definitive exemption”, admitted Jean-Philippe Tanguy on RTL. In 2022, Warsaw has decided to lower its VAT on diesel and fuels from 23% to 8%, as part of an anti-inflation plan, reports the International Energy Agency. Questioned by franceinfo, a European official denies that the EU has accepted a reduction in VAT on Polish fuels.
Poland, however, obtained a derogation to apply a reduced rate on excise duties [autre impôt indirect sur la consommation] “heavy fuel oil, natural gas, coal and coke used as heating fuels” throughout 2023, Brussels announced on its website, against a backdrop of the energy crisis and galloping inflation. Indeed, Article 19 of the 2003 Directive on Energy Taxation in the EU states that “the Council, acting unanimously (…), may authorize a Member State to introduce additional exemptions or reductions for specific policy reasons”.
“For VAT on fuel, the normal rate applies, namely 15% minimum”specifies the European official, emphasizing that“there is no exemption possible on VAT”. According to this source, the only products that can benefit from reduced VAT are those mentioned in “Annex III of the VAT Directive, which was unanimously approved by the Member States and which has been in force since April 2022”.
Furthermore, a definitive exemption on fuels is incompatible with the 2022 directive, which provides for a deadline of 2030 for reduced taxation of fossil fuels. In this case, a new directive would need to be put in place. “If the EU defines travel as a first necessity, then we can negotiate on fuel. But here again, the other 26 member states must agree”, warns Guillaume Baticle. Clearly, only part of the RN’s promise can apply under current European law: reduced VAT on gas and electricity.