The EU, in its ever-increasing push towards sustainability, is considering reducing or removing value added tax (VAT) on bicycles. However, many are upset that electric bicycles are not included in the same category.
EU VAT laws regarding electric bicycles
In a new proposal published by the European Commission, the body recommended updating VAT rules for a number of products.
That group includes pedal-powered bicycles while omitting battery-powered electric bicycles.
According to the proposal, member states would have the option of reducing or entirely removing VAT added to such products. Currently, VAT on electric bicycles generally falls in the range of 15%-19% in the EU.
The move seems counterintuitive, but could be explained by the classification of electric bicycles as motor vehicles similar to gas-powered vehicles.
As reported by Bike EU, the organizations European Cyclist Federation and the Confederation of the European Bicycle Industry released a joint statement explaining the discrepancy:
“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”
Electric bicycle adoption rates have soared in Europe. However, many fear that the exclusion of electric bicycles from tax incentive plans such as this could hamper their continued growth.
According to the two organizations:
“The VAT proposals also threaten to undercut member state’s numerous initiatives that successfully boost e-bike usage. For example, when France introduced a national purchase incentive scheme for e-bikes, a large-scale survey revealed that e-bike trips had replaced 61% of car journeys, compared to 21% by conventional bicycles.”
This isn’t the EU’s first foray into using tax adjustments related to electric bicycles. Earlier this summer the European Commission accused China of illegally dumping e-bikes in the EU. They eventually instituted a tariff designed to protect European electric bicycle manufacturers. That move also caused an outcry as industry leaders argued that it would limit consumer options and increase prices.
The United States also joined the e-bike trade war as it contemplated including Chinese-imported electric bicycles in an upcoming wave of new tariffs. Despite strong opposition across the country, electric bicycles imported from China were slapped with 25% tariffs.
In the US, electric bicycle importers responded en masse, indicating that such moves would only serve to increase prices. No electric bicycle manufacturers opened factories in the US. Instead, many simply moved production from China to other Asian countries such as Taiwan and Vietnam.
This seems like a missed opportunity by the European Commission to help promote electric bicycles.
Surely the same goals that are being achieved by promoting the purchase of standard pedal-powered bicycles can also be achieved by increased use of electric bicycles.
Hopefully this can be solved with a simple reclassification of electric bicycles. Though nothing is ever that simple when it comes to bureaucracy.
Considering the impressive effect that incentives had on electric vehicle sales in many European countries, it seems like a no-brainer to also incentivize electric bicycles. Electric cars are great, but they don’t have as big of an impact on traffic and congestion as electric bicycles. By incentivizing more electric bicycles, scooters and motorcycles, two wheeled EVs can help become part of the larger solution to sustainable transportation across Europe. And since the US tends to follow Europe on these matters, maybe we’ll get some nice e-bike incentives down the road too!
What do you think? Should electric bicycles receive tax reductions or incentives? Let us know in the comments below.