CBI calls for review of green taxes

by Richard Crump

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15 Jun 2012

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THE CONFEDERATION of British Industry has called on the government to undertake an independent review of its existing environmental tax landscape.

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

The government initiative Carbon Reduction Commitment Energy Efficiency Scheme (CRC), forces companies to pay for and report on their carbon emissions related to energy use.

The implementation of environmental taxation has been steadily increasing since the mid-1990s, from just four taxes in 1989, to 12 in place today, raising £43.4bn in 2010/11. This represents almost 8% of total tax revenue.

According to the report, Solving a Taxing Puzzle: Making environmental taxes work for business, companies have become disillusioned with the environmental tax landscape, believing the combination of taxes does not work well, is unnecessarily complex and is a drag on business competitiveness.

"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," said Ian McCafferty, CBI chief economic advisor.

The report found the most poorly regarded tax is the CRC, which is seen to have become an overcomplicated revenue-raising instrument, and is simply being written off as a cost of doing business in the UK.

"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," said Rhian Kelly, CBI director for business environment policy.

When initially constructed by the Labour party it was proposed that revenues from the CRC would be used for investment in environmental initiatives and to fund the scheme. However, when the Tory party were voted into power it was decided revenues from the CRC would go into the government coffeurs.

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