Taxing the Throwaway Culture: Commission Asks How VAT Can Go Circular

The European Commission has officially opened a public consultation asking businesses, consumer groups, and tax experts how Value Added Tax (VAT) rules should be reformed to support a low-emission, circular economy. The initiative, launched on 11 September 2026, forms a key building block for the executive's upcoming Circular Economy Act. Under current European rules, consumption taxes were designed primarily for a traditional linear economy—where raw materials are extracted, manufactured into goods, sold, and eventually discarded. The Commission is seeking feedback on where those tax frameworks now actively penalise companies built around repairing, refurbishing, sharing, or recycling existing products, and what specific tax adjustments could make choosing a second-life item more attractive to consumers.

VAT is the sales tax added to almost every transaction across the European Union. Because the system was drawn up to tax the value added at each stage of manufacturing something new, it often fits second-hand and circular services awkwardly. A local repair shop, for instance, pays standard tax rates on the intensive human labor needed to fix a broken machine, whereas a mass-produced replacement manufactured overseas can benefit from economies of scale that make buying new cheaper than mending the old. If EU member states eventually agree to lower VAT rates for repair services or revise margin schemes for reconditioned goods, extending the lifespan of electronics, clothing, or household appliances could become noticeably cheaper for everyday consumers.

In the EU hierarchy of policy headaches, taxation sits near the very top. While the European Commission can draft tax initiatives, national finance ministers in the Council of the EU must approve tax rules unanimously—meaning any single member state holds veto power if it worries about shrinking national revenues. That institutional hurdle makes public consultations far more than a routine bureaucratic exercise; they are where the Commission collects market evidence to convince 27 cautious capitals. By building an empirical case that current VAT structures contradict the bloc's broader climate and resource goals, Berlaymont aims to create momentum before facing the inevitable friction of member-state tax negotiations.

The public consultation is gathering input from industry bodies, circular start-ups, non-governmental organisations, and individual citizens. The feedback collected will directly inform the legislative draft of the Circular Economy Act. Once the Commission publishes its official proposal, the text will head to the European Parliament and the Council for detailed scrutiny, where national governments will have the final say on any proposed tax adjustments.