CBI, CBI calls for re-think on green taxes that costs business £14 billion

Manufacturing News, Source : TheManufacturer.com
Published : 12 Apr 2002 9:30

The CBI has called on Government to re-think green taxes in the interests of competitiveness and the environment.

The report published today, 'Green taxes: rhetoric and reality', shows that green taxes cost business £14 billion a year, the equivalent to £1 in every £8 of business taxation. Business has seen its contribution to environmental taxation rise by 15 per cent in the last five years.

The report says that the use of tax to promote environmental goals can make sense in theory, but that firms are concerned about shortcomings in practice on tax design and implementation.

The environmental justification for some taxes has been poorly reflected in their design. The Climate Change Levy (CCL) only partially addresses the environmental issue of carbon emissions by taxing the amount of energy used by business.

Green taxes have also led to unintended consequences. A recent National Audit Office report suggested that high fuel duties cost the Treasury £830 million a year in lost revenues because of petrol and diesel smuggling.

The role of environmental taxes alongside other policy measures has not been clearly set out. For example the environmental impacts of aggregates extraction are already subject to a raft of regulation and it is not clear how the aggregates levy will add value to that regime.

Little attention has been given to the needs of competitiveness. CCL discounts are less favourable than the approach of other governments, such as in Germany and the Netherlands, towards business energy taxes. Where Government has accepted the need to tackle issues, it has often only been as a reactive approach, like commitments to measures to aid road hauliers.

Michael Roberts, CBI Director of Business Environment, said: "Green taxes provide a larger share of total Government taxation in the UK than the EU average. With business paying over half of the UK's green tax take, it is vital to our competitiveness that these taxes are fit for their purpose.

"Firms want to see a reduction in the overall tax burden. But it is clear that the Government must also tackle flaws in green taxes. There needs to be a review to improve their transparency and effectiveness in promoting both environmental improvement and sustainable wealth-creation."

The report recommends that the government:

 Review its overall approach to environmental taxation including implementation and monitoring procedures, to improve transparency and effectiveness of such taxes and to amend where unintended consequence.

 Gives more weight to developing simplified positive tax incentives to change behaviour.

 Should ensure that environmental tax rules protect the UK's competitive position within the EU and globally.

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