CBI calls for urgent review of green taxes

15th June 2012


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Environmental taxation in the UK is uncoordinated, badly designed and has damaged business growth, according to the CBI

It wants the government to mount an independent review of environment taxes to identify those that fail to improve companies’ environmental impacts, and act as a barrier to investment. The CBI claims the Carbon Reduction Commitment Energy Efficiency scheme (CRC) is a prime example of such a tax.

According to the business body’s latest research, companies believe that taxes can help to drive more sustainable business practices, but that the existing UK environment tax landscape has no clear direction, is susceptible to change at short notice and is poorly communicated.

Representatives from 70 firms were interviewed for the research, and all agreed that environmental taxes did not work well together, with one Scottish manufacturer stating: “The uncoordinated increase in environmental taxes raises serious concerns over our future competitiveness.”

The CBI argues that government departments have failed to appreciate the impact of environmental taxation on different sectors of the economy.

“The current uncoordinated approach to environmental taxes is not working for business,” said Rhian Kelly, CBI director for business environment policy. “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.”

Alongside an urgent review of existing taxes, the CBI recommends that in future the government undertakes an impact assessment for any new tax, which considers the cumulative impacts of all environmental taxes. The business body also says the government should clearly state the purpose of the new tax and why it is the best way of achieving that aim.

According to those questioned by the CBI for its research, vehicle excise duty and the landfill tax regimes work well, because they have a clear function, work with other policy measures with similar aims and operate against a clear timeline.

At the opposite end of the scale, the majority of participants cite the CRC as an example of a poorly designed and implemented tax scheme

“The CRC lacks a clear purpose and has undergone frequent, unexpected changes ... the overwhelming business view is that it is damaging, rather than driving, business investment,” the report states.

Coinciding with the publication of its report into environmental taxes, the CBI also published its response to DECC’s consultation on a how to simplify the CRC. Once again its calls for the scheme to be scrapped.

“The CRC has become a tax that pretends to be green and does nothing to strengthen the business case to invest in energy efficiency,” argued Kelly. “We urge the government to recognise this policy is past the point of no return – it should be scrapped, and its reporting elements replaced with mandatory carbon reporting.”

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