Commissioner Gentiloni issues guidance in the area of energy taxation to EU Member States

Russia’s senseless war in Ukraine has caused incalculable suffering of the Ukrainian people and a deep wound to European values. It has also had an inevitable impact on the European economy and aggravates challenges we are already facing, such as rising energy and wheat prices.

A coordinated EU response to rising energy prices is of the essence to safeguard the Single Market and avoid further divergences across Member States. In a letter to all EU Finance Ministers, EU Commissioner for Economy, Paolo Gentiloni, today provided further guidance to Member States in the area of energy taxation by clarifying the applicable rules under EU law. The guidance highlights in particular the possibilities for reduced rates applicable under the EU’s VAT rules (the VAT Directive) and excise duty framework (the Energy Taxation Directive). In his letter, the Commissioner also recalls a number of key principles that should guide action in this field - notably, the effectiveness, consistency and equity of policy measures.

The European Commission is well aware of the need to cushion the impact of high energy prices on households and businesses, in particularly those most vulnerable, while also avoiding supply disruptions. In its Communication of October 2021 on energy prices, the Commission presented a toolbox to guide Member States’ action, including in the area of taxation. More recently, EU leaders discussed a number of options to curb prices, on the basis of the Commission Communication of 23 March. Over the last months, most Member States have lowered taxation on energy, introducing reduced VAT rates or reduced excise duties on energy products and electricity, making use of the flexibility provided by the current EU legal framework.

Read Commissioner Gentiloni’s full letter.