After the value added tax on wood pellets had been increased more that twice, Italian government adopted a new VAT rate of 10%, which corresponds with the tax rate before its boosting.
The Boosting of the Value added tax on wood pellets was due to legislative "Stability Law". This program states the pellets VAT increasing from 10% to 22% and attains legal validity starting from January 1, 2015. The tax increasing of such a scale influenced the pellet prices considerably, what induced unanimous discontent among consumers.
It is a well-known fact that for meeting their energy targets of 2020 the member states of the European Union are developing renewable energy sources. Pellets are considered to be one of the most efficient fuel types in this context. It is the most affordable option, which doesn't require expensive equipment to be installed, and that makes them a convenient variant not only for industrial consumption, but also for private use aimed at heating purposes. Pellets don't affect the environment when produced from sustainable raw materials, and the carbon dioxide emitted while their burning is eventually neutralized due to the new planted trees. The EU member states consume up to 70% of world wood pellet production. And Italy is the largest pellet consumer among the European Union countries.
Earlier the Italian government introduced different programs for wood pellet promotion among the citizens, so that they installed the equipment for domestic heating with wood pellets. As of today more than two million families use pellets for domestic heating in Italy. Most of them have chosen this option because of the high energy tariffs and economic crisis in the country.
The VAT rate increasing was estimated to bring to the state budget about €96 million annually, provided that the consumption remains at the previous levels of 3,5 million tons per year. But the new tax rate of 22% is likely to increase the price of 1 ton of pellets by €30-35, and the price of one 15-kilo pellet pack will be 50 eurocents higher, which will inevitably affect the final consumer.
Such a considerable leap in prices may also have an influence on the pellet market as a whole. Price increasing is likely to bring about the decline in demand, thus, the production scales will be affected as well. The pellet industry provides thousands work positions and as a result is an inalienable branch of the country's energy industry. In terms of production and employment scales, pellet industry surpasses the oil development sphere in Italy.
On the other hand, the point about additional financial aid of €96 million for the industry is stated in the very Law of Stability,that seems to be at least irrational. Additional funding of the sum mentioned will bring to naught the revenues for the state budget and the increased VAT rate and the consequent prices will be up to average consumer to struggle with.
Referring to the reasons revealed, the AIEL – an organization of Italian energy companies, launched a petition to the Prime Minister of Italy Matteo Renzi, expressing their discontent with the new introduction. Reviewing the government decision as "incomprehensible and unpopular", they demanded the two items to be excluded from the Stability Law: the first is about the pellet VAT rate rising and the second one is of the additional financial aid.
Owing to active public reaction and pellet consumers, the government came to the conclusion to reverse the value added tax to the initial rate of 10%. This decision was announced on October 15. Whereas in the recent years the country was in economic crisis, the government implemented stringent measures of economy regulation. Currently, in time of relative stability, the decision to loosen the taxation was made, in order to give an additional push for further economic development in the country.
Stability Law (Legge di Stabilità) – legislative act in Italy, which determines the main directions for economy development in the country, taxation peculiarities etc.
AIEL (Associazione Italiana Energie Agroforestali) - Italian Association for Agricultural and Forestry Energy unifies more than 300 organizations and companies in Italy, thus, representing the base of renewable energy industry in Italy.
