Circular VAT as a Pillar of the Circular Economy

On 21 November, Emmanuelle Ledoux, Director General of the Institut National de l’Économie Circulaire (INEC), and Emery Jacquillat, Chairman of Camif, presented an innovative report on circular VAT to the French Minister for Ecological Transition, Christophe Béchu. This report, the result of two months of in-depth studies and consultations in key sectors of the economy, proposes crucial measures to speed up the transition to a circular economy. This article explores in detail the issues raised by the report and highlights the importance of circular VAT in creating a more sustainable economic model.

Context: The urgent need for ecological transition

The current context calls for a profound re-evaluation of our production and consumption patterns. The increasing scarcity of natural resources, the growing problems associated with waste and pollution, and the devastating impact on the climate all call for immediate action. In this context, the INEC and Camif report proposes circular VAT as a potentially powerful lever for stimulating repair, reuse and, therefore, the circular economy.

Why circular VAT?

1.Reducing VAT on repairs

The report’s main proposal is to introduce a reduced VAT rate of 5.5% on repairs to household appliances, footwear, leather goods, clothing and household linen from the 2024 Finance Act. The aim of this measure is to encourage consumers to choose repair rather than the purchase of new products, by making this option more economical.

2.Measuring the impact of reduced VAT rates

Another key measure is the proposal to measure the economic, social and environmental impact of reduced VAT rates. This would make it possible to assess the effectiveness of tax incentives in promoting more sustainable practices.

3.Clarifying the Notions of Reconditioning and Remanufacturing

The report also proposes to clearly define the concepts of reconditioning and remanufacturing, including them in the circular VAT framework. A precise definition is essential to avoid misunderstandings and ensure consistent application of tax policy.