UK government called to review green taxes

Green taxes now make up some 8% of the UK’s tax revenue but many businesses feel that the current system is unnecessarily complex and a burden on competitiveness.

The CBI says that some taxes have been successful – such as the landfill tax and the vehicle excise duty – and when they are, they stimulate business investment, drive growth and reduce the environmental impact.

But as environmental legislation has grown from just four taxes in 1989 to the current 12 now in place, which raise £43.3 billion, the combination of taxes do not now work well together.

“Well-designed, environmental taxes can be a useful tool to help firms improve their environmental performance and unlock significant business investment. However, poorly planned environmental taxes have damaged businesses and made the UK tax system less attractive to would-be investors,” says the CBI’s economic advisor Ian McCafferty.

Environmental taxes must have a clear purpose and definition, says the CBI, and fit into the wider strategy. They should also be designed to be simple, provide certainty to business and be coupled with comprehensive communication and advice.

In the meantime, CBI is calling on the government to drop on its Carbon Reduction Commitment (CRC) energy efficiency scheme scheme entirely in favour of mandatory carbon reporting.

The government’s lack of clarity on green taxes was also criticised earlier this year by the Environmental Audit Committee, which urged the Coalition to develop a green taxation strategy aimed primarily at changing behaviour rather than generating revenue.

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