The EIB-European Investment Advisory Hub, in conjunction with the European Commission, the SBCI and the government funded Sustainable Energy Authority of Ireland (SEAI), today hosted an event in Dublin examining how energy efficiency is financed in Europe. The Minister for Communications, Climate Action and the Environment, Richard Bruton T.D. attended the event which highlighted the importance of providing low cost finance options for homeowners and businesses if ambitious targets for energy saving are to be met.
Speaking at the event, Minister Bruton said: “We need to change how we live now, if we are to secure a sustainable future for all. This is a profound challenge to every citizen, every enterprise, every public service and every community. The reality is that our current trajectory with regard to sustainable energy use is not where it needs to be. We are making progress but we need to do more and do it quickly. Lack of funds is one of the main reasons homeowners are not carrying out much needed energy upgrades, that is why low cost finance options for these upgrades are so important. Similarly SMEs and the public sector need innovative financing mechanisms to enable change to happen faster and keep pace with our ambitions. The work that the government through SEAI are progressing with the EIB, the Strategic Banking Corporation and local high street banks, is seeking to bridge the gap between portfolios with excellent return on investment and the type of large scale funding required to accelerate activity.”
There are currently about 2 million homes in Ireland accounting for 25% of energy related emissions. However, about half of these have a BER rating of D or less. Significant opportunities exist for business both in terms of savings and developing solutions. SEAI’s grant programmes are the main driver of activity among homes and businesses but many still feel the initial outlay is a barrier. If Ireland is to reach its targets then this must be overcome.
Jim Gannon, Chief Executive of SEAI said: “SEAI has supported over 400,000 homes with energy upgrades and many thousands of businesses have also carried out energy projects as a result of our advice and incentives. As we now look towards 2030, it is apparent that traditional incentives and exchequer funding will not, and should not, be expected to support all of this transition. Across almost all energy efficiency interventions, we see benefit across the value chain. Engaging private finance, of various types, is essential to moving us towards a more sustainable economy, at the pace that will meet our ambition.”
Opportunities exist across the country with a significant body of work in need of being carried out. This is good news for contractors but also makes financial sense for the state and for individual homeowners and businesses.
Addressing the role of the European Commission, its Vice-President for the Energy Union Maroš Šefčovič said: “To achieve the EU's 2030 climate and energy goals, around EUR 180 billion of additional investments per year are necessary. Around 75% of those investments need to be channelled to improve energy efficiency in buildings. This requires developing and deploying breakthrough innovation on a massive scale, while both, public and private sectors need to play their part. We are mobilising our instruments to support Energy Efficiency in the built sector: Strategic Investment Fund, European Regional Development Fund, Smart Financing for Smart Buildings etc. We are stepping up our game. That is why during 2021-2027, the Commission envisages a 25% climate mainstreaming, meaning that more than EUR 300 billion of our funding would contribute to climate objectives.”
Andrew McDowell, Vice President of EIB who made the opening address at the event, said: “Cutting energy use is crucial for tackling climate change and saves money. Last year the European Investment Bank provided EUR 4.8 billion for energy efficiency investment around the world and energy efficiency is a key focus of the European Investment Advisory Hub. Building on close cooperation between Irish and European partners in recent months, today’s practical discussions bring together more than 120 representatives of local government, utilities, housing bodies and business from across Ireland and energy efficiency experts with experience around Europe. We look forward to building on today’s overview of best practice and successful implementation of energy saving measures to scale up advisory and financing for energy efficiency in Ireland in the years ahead.”
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These provisions can generate major distortions of competition, as highlighted by last year's 'Paradise Papers' leaks.
In light of its subsequent investigations into these matters and contacts with the Member States concerned, the Commission decided today to send a letter of formal notice to Italy for not levying the correct amount of VAT on the leasing of yachts. The Commission also decided to send a reasoned opinion to Italybecause of its illegal system of exemptions for fuel used to power charted yachts in EU waters. Finally, a letter of formal notice was sent to the UK concerning the Isle of Man's abusive VAT practices with regard to supplies and leasing of aircraft.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs Union, said: "It's simply not fair that some individuals and companies can get away with not paying the correct amount of VAT on products like yachts and aircraft. Favourable tax treatment for private boats and aircraft is clearly at odds with our commonly agreed tax rules and heavily distorts competition in the maritime and aviation sectors. With this in mind, the Commission is taking action to clamp down on rules that try to circumvent EU law in these areas."
In detail, the infringement procedures launched today concern:
- A reduced VAT base for the lease of yachts offered in the tax law of Italy. Current EU VAT rules allow Member States not to tax services when the effective use and enjoyment of the product is outside the EU. But the rules do not allow for a general flat-rate reduction without proof of where the service is actually used. Italy has established VAT guidelines according to which the larger the boat is, the less the lease is estimated to take place in EU waters. As a consequence, such rule greatly reduces the applicable VAT rate.
- Excise duty rules for fuel in motor boats in Italy. Current EU excise duty rules allow Member States not to tax fuel used by a navigation company for commercial purposes, i.e. the sale of sea navigation services. However, an exemption should only apply if the person leasing the boat sells such services to others. In breach of EU rules, Italy allows chartered pleasure crafts such as yachts to qualify as 'commercial' even when being enjoyed for personal use, which may allow them to benefit from excise duty exemption on fuel used to power its engines.
- Abusive VAT practices in the Isle of Man. VAT is only deductible for business use. Supplies of aircraft, including leasing services, meant expressly for private use should not be VAT-exempt. The Commission believes that the UK has not taken sufficient action against abusive VAT practices in the Isle of Man with regard to the supplies and leasing of aircraft.
The Paradise Papers revealed widespread VAT evasion in the yacht and aviation sectors, facilitated by national rules which do not comply with EU law. These infringements follow a first package of infringements launched against Cyprus, Malta and Greece on reduced VAT basis for the lease of yachts and for which the Commission received assurance from all these Member States that the legislation would be amended.
In addition to the infringement procedures launched today by the Commission, the European Parliament has recently indicated that its TAX3 committee following up on the Paradise Papers would also look at this issue. The committee is due to visit the Isle of Man in November.
Italy and the UK now have two months to respond to the arguments put forward by the Commission regarding VAT on yachts and aircraft, respectively. If they do not act within those two months, the Commission may send a reasoned opinion to their authorities.
If Italy does not act within the next two months on the reasoned opinion adopted today on excise duty, the Commission may decide to bring the case before the Court of Justice of the EU.
Since the beginning of its mandate, the Juncker Commission has been at the forefront of European and international efforts to combat tax avoidance and tax evasion. When it comes to VAT, recent Commission initiatives seek to put in place asingle EU VAT area which is less prone to fraud and to enhance cooperation between Member States. The problem of VAT fraud knows no borders and can only besolved effectively by a concerted, joint effortof Member States.
For More Information
- On the key decisions in the November 2018 infringements package, see full MEMO/18/6247.
- On the general infringements procedure, see MEMO/12/12.
- On the EU infringements procedure.