Should the European Union be doing more to promote e-bikes?

As the EU searches for answers to its need for greater energy efficiency, it has announced that bicycles could be exempt from VAT in the future. If not, it could be reduced to encourage bike use. But, the news that the tax changes won’t apply to electric bicycles has upset a number of environmental organisations.

Could the EU be missing out on an opportunity? After all, in some cases, e-bikes have shown to be more effective in lowering the number of car journeys. For example, when France introduced a widespread, national scheme for e-bikes. In a follow-up survey, it was found that they had replaced around 61% of car journeys in users, compared to just 21% in those using traditional bikes.

How are electric bikes categorised?

Electric bikes are currently classified as being similar to fuel powered vehicles. E-bikes “have been categorized alongside transport powered by fuel, oil and gas as goods whose sale will be subjected to the standard VAT rate of at least 15%.”

This means that, in the new proposals released by the Commission, the updated VAT rules would include pedal bikes, but exclude those that are battery powered. The current rate of VAT on these products is between 15% and 19%. However, many groups fear that excluding e-bikes from the plans could hinder the high levels of growth that’s been seen in the industry in recent years.

What do cycling groups recommend?

According to European Cyclist Federation and the Confederation of the European Bicycle Industry:“E-bikes have been categorized alongside transport powered by fuel, oil and gas as goods whose sale will be subjected to the standard VAT rate of at least 15%. This is a cause for concern because electric bicycles present numerous social and environmental benefits.”

“As a sustainable mode of transport that doesn’t emit pollution, they stand to greatly contribute to the achievement of the EU’s environmental and transport targets. The VAT proposals also threatens to undercut member state’s numerous initiatives that successfully boost e-bike usage.”

Therefore, the organisations have recommended that: “The Council to extend the exemption of bicycles from obligatory standard VAT rates to e-bikes, and create a specific category for this product. This has the potential to reduce the cost of e-bikes for customers in countries with lower income levels, and is cost-efficient, with e-bikes being projected to save 4.4 billion euros in public health and CO2 emissions reduction over the next five years.”

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