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Incentivising design quality and sustainability: VAT is a powerful tool and changing the rates can incentivise the sustainability agenda

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The majority of CO2 emissions in the built environment emanate from the existing building stock along with a smaller quanity from the process of new construction. The focus should therefore be on improving existing buildings wherever possible.

Current VAT rates incentivise CO2 emissions by distorting the construction market in favour of new build. In the residential sector, the current VAT rate encourages new build construction rather than improving existing buildings, even when saving energy. For private and public (public/private) finance the different VAT rates divert resources towards new construction.

Not only do current VAT rates incentivise emissions, they distort the market and its ability to respond to other policy objectives. This distortion is a major constraint for sustainable green procurement policy.

There is a need to reappraise ways in which the VAT system can be used to help progress the Government’s low carbon agenda, in a balanced, more fiscally neutral way.
Original languageEnglish
PublisherRIBA
Number of pages11
Publication statusPublished - Feb 2013

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