Passenger transport in the EU’s VAT system: time to abolish exemptions

Environmental organisations have long been concerned about the current rules relating to passenger transport VAT. The transport sector now accounts for the largest share of the EU’s greenhouse gas emissions, and the growth of aviation emissions now outstrips almost all other GHG sources. Yet member states oversee a VAT system which, through voluntary derogations, further inflates aviation’s rapid growth while also distorting competition with less carbon-intensive transport modes.

T&E welcomes the European Commission’s current review of the VAT system and proposals to establish a definitive VAT regime. This brief sets out T&E views on the current situation together with our proposals on how VAT rates can be best reformed to benefit EU competitiveness while also contributing in a positive way to the achievement of the EU’s climate goals.