On 27 February 2019 I attended a seminar organized by ACCA (the Association of Chartered Certified Accountants) in Brussels, entitled “Tax as a force for good: Rebalancing our tax systems to support a global economy fit for the future.” The seminar discussed a report produced by ACCA of the same name.
The need for tax systems to adapt
The thesis of the report is that the foundations of modern tax systems were laid down in the era of industrial revolution: before globalization and mass consumption, before the emergence of climate disruption and water supply risks, and before digitalization, automation and robotization. Therefore, considering the current fast-changing world, tax systems will need to adapt. This may include specific measures such as carbon taxes, landfill levies or taxes on single-use plastic. However individual measures are no longer enough. In order to craft a tax system that is fit for the 21st century, it is necessary to think more widely about what governments should be taxing, and how the tax revenues should be used.
Speakers were comprised of professionals from regulatory bodies, industry and tax professionals from around the globe.
The key issues of tax
There were diverging views about how tax could be used to generate green growth in the circular economy. Some of the key points discussed included:
- whether or not tax is seen as a force for good does depend upon the country, the trust which citizens have in their government and whether they believe they are getting value for the tax payment;
- green taxes should not be seen as a “punishment” for certain behavior but as a means for internalizing costs in line with the market economy;
- the revenue from green taxes can be significant and can be used to reduce, say, labour taxes which are considered a greater drag on the economy;
- green taxes are not necessarily regressive - for example studies in some low income countries show that the poor spend less on fuel than the rich and therefore are less impacted by carbon/fuel taxes; furthermore in judging progressivity it is necessary to look at the overall mix of taxes and also to recognize that in many parts of the world it is the poor who are disproportionately affected by climate change;
- green taxes can result in an administrative burden especially for SMEs as the overall burden of tax does not reduce but become split between multiple taxes - i.e. increased green taxes and reduced labor taxes;
- it was queried by one speaker whether taxes were an efficient tool to change behavior;
- it may be more effective to use revenues from green taxes to invest in R & D on green technology rather than reduce other taxes to pay for social projects.
The full report can be accessed here:
by Chris Morgan
Chris became Head of Tax Policy for KPMG UK in 2011. In this role he was a regular commentator in the press, as well as on radio and TV, led discussions on various representations with HMRC/HMT. In 2014 Chris spearheaded KPMG UK’s Responsible Tax for the Common Good initiative. In September 2016 Chris took on the role of Head of...