They’ve already banned plastic bags. Now, Rwanda is exempting electric cars and electric car parts from VAT. Electric vehicles will also be exempt from import duties. Rwandan officials are also looking to promote electric car production in the county.
In addition, many energy-efficient items are already exempt from VAT in Rwanda. For example, there is no VAT on solar panels and solar water heaters. Clean energy machinery is also exempt from VAT, as are energy-efficient cooking systems.
VAT as a global green policy tool
Increasingly, policymakers are looking to reform VAT policy to help incentivise a greener economy. For instance, UK MPs recently called for a reduction of VAT on electric cars and other energy efficient items.
The call for VAT reductions on green technology was echoed by ‘cleantech’ businesses in the UK. They say that cutting VAT will boost spending on more energy-efficient goods and help the UK meet its climate goals.
Green recovery packages
Governments around the world are introducing significant fiscal stimulus initiatives to help drive the recovery from the economic slowdown associated with Covid-19.
Many organisations suggest that these initiatives therefore provide an opportunity to develop greener economies. Carefully designed green stimulus packages can help governments meet their climate goals. (For example, the UK has set an ambitious carbon net-zero target for 2050.)
The OECD says that “exceptional times can provide a window of opportunity for broader tax reform, which could support the adoption of politically and socially acceptable reform packages that are aligned with a broader well-being agenda.”
Stay ahead of VAT regulations
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