Parliament’s finance committee questions use of temporary VAT rate cuts as consumer support
The European Union Parliament’s Committee on Economic and Monetary Affairs (ECON) has questioned the use of reduced VAT rates in time of crisis to help consumers. This week, it adopted a resolution on general tax policies in times of crisis, particularly the recent COVID epidemic. ECON is concerned that the impact of temporary VAT reductions for end consumers was limited and was more pronounced for companies that increased their profit margins because of these reductions. It has called on the European Commission to review this area further.
During the COVID and inflation spike crises, many countries cut temporarily VAT rates on basics such as food and energy.
This come despite IMF criticising inflation VAT cuts in a recent report, and has been joined by the OECD review of VAT reductions and other policy remedies.
