Impact of a Reduced VAT Rate for Repair Services

Repair, reuse, remanufacturing, refurbishing and recycling are central challenges in the implementation of a circular economy. The study analyses the potential of various measures to promote the repair sector and estimates in particular the expected fiscal effects. Specifically, four measures are analysed in terms of their impact: 1. a reduction in the VAT rate under the current VAT Directive from 20 to 10 percent on repairs of bicycles, shoes and tailors; 2. a reduction in the VAT rate on all repairs of consumer goods; 3. direct support in the form of a repair cheque; and 4. indirect support via the deductibility of repair costs from income tax. The highest direct fiscal effect would come from a reduction of the VAT rate on repairs of consumer goods, including electrical and electronic equipment. It should be pointed out, however, that this would not be possible under the current legal situation.