Member Article

CBI calls for environmental tax review

The CBI has on the Government to undertake an independent review of environmental taxes.

In-depth interviews with 70 CBI members informed the new report: Solving a Taxing Puzzle: Making environmental taxes work for business.

It found that firms believe environmental taxes can help stimulate business investment, drive private sector growth and reduce the environmental impact of business activity.

In a separate response to the Department of Energy and Climate Change’s (DECC) Consultation of a Simplified CRC Energy Efficiency Scheme, it also urged the Government to scrap the Carbon Reduction Commitment (CRC) and implement mandatory carbon reporting.

As the use of environmental taxation has risen since the mid-1990s, the research shows some individual taxes have been successful.

Landfill Tax and Vehicle Excise Duty are well regarded, however the likes of Air Passenger Duty and the Carbon Reduction Commitment, were viewed much more negatively.

Some disillusionment with the current landscape was apparent, including the perception that many were unnecessarily complex and a detriment to competitiveness.

Ian McCafferty, CBI Chief Economic Adviser, said: “With the number of environmental taxes on the increase and proving to be a major revenue raiser for Government, it’s essential that we take stock of the successes and failures from a business perspective.

“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.”

The report confirms that environmental taxes do play a part in revenue-raising, but existing policy is hampering their full potential.

It is argued businesses need a more strategic framework, with an effective coordinated approach across Government.

The CBI recommends the Government recognises six fundamental guidelines for any new or changed environmental tax, including clear purpose and definition; to take strategic fit into account; to be designed with simplicity at their core; offer comprehensive communication and advice; provide certainty to businesses; and to ensure a strong, ongoing justification.

Rhian Kelly, CBI Director for Business Environment policy, said: “The current uncoordinated approach to environmental taxes is not working for business.

“An independent review of environmental taxes has become an urgent priority. With a more joined-up approach, environmental taxes could provide certainty for businesses, unlock investment, and reduce the impact on the environment without damaging UK competitiveness.”

On the notion that the Carbon Reduction Commitment should be scrapped and mandatory reporting implemented, Rhian said: “The CRC has become a tax that pretends to be green and does nothing to strengthen the business case to invest in energy efficiency.

“We urge the Government to recognise that this policy is past the point of no return – it should be scrapped, and its reporting elements replaced with mandatory carbon reporting.”

This was posted in Bdaily's Members' News section by Tom Keighley .