Turning tax into a force for good
6 PARTNERS JOINED
UNITED BY TAX brings together entrepreneurs, businesses and organizations who support the Global Goals and the circular economy.
Partners of UNITED BY TAX believe that tax can be turned into a force for good.
our mission
why
UNITED BY TAX partners believe that
- Businesses and societies can flourish by saving natural resources and tapping into the abundance of human potential instead.
- Tax systems play a key role in achieving the Global Goals and inclusive circular economies.
Tax can be turned into a force for good.
how
Tax systems should be aligned with the Global Goals and the inclusive circular economy by
- Putting a price on natural resource use and pollution, which would provide incentives to save resources and the natural world, and
- Lowering the tax burden on labour, which would support households and provide opportunities for job creation; developing the full potential of human ingenuity, craftsmanship and creativity.
what
UNITED BY TAX contributes to these goals by
- Analysing and showcasing the impact of a tax shift from labour to natural resource use on economies, business models, the environment, wellbeing and social inclusion.
- Advising and inspiring policy makers on implementation routes.
Let’s share the great story of what a systems change can do!
TURNING TAX INTO A FORCE FOR GOOD
our partners
impact
now is the time
 | Tax reform can play an important role in greening growth. The evidence-driven simulations presented in this report of the Ex’tax Project suggest that shifting taxes from labour to consumption and natural resources will result in more growth, more employment, and a smaller environmental footprint. We have enough evidence to support green tax reform and concrete policy action.  |
Angel Gurría, OECD Secretary-General
what we do
Build knowledge
Aligning tax policy with the Global Goals and the circular economy looks different in different regions of the world. UNITED BY TAX builds thought leadership and tools to serve policy makers, businesses and the general public in the process of putting the theory of ‘tax as a force for good’ into practice.
Create showcases
How does a tax shift change the dynamics in business? And what is the impact on public services such as healthcare and education? UNITED BY TAX partners feature as showcases to illustrate the potential impact of a tax shift.
Spread the word
Partners reach out to their networks to share their insights and experiences. The ultimate goal is to foster global support for the tax (r)evolution.
questions
Why does tax matter?
Currently, tax systems put a high or increasing tax burden on labour, while leaving natural resource use and pollution (eg the use of water, metals, and carbon emissions) relatively untaxed or even subsidised.
This means taxes are aligned with the linear ‘take-make-waste’ economic model, which is focused on maximising resource extraction and consumption and minimising the input of human capital.
The 17 Global Goals agreed by 193 countries of the United Nations are a clear ‘todo’ list for humanity. The most daunting tasks are to adapt the metabolism of our economies to match the carrying capacity of the earth and stay below 2 degrees Celsius global warming. We face equally important social challenges in our societies, including enabling a growing population to develop to their full potential and find decent work.
Since taxes have a fundamental impact on investment, employment and consumption decisions, they will need to evolve. They should now be aligned with the goals of the inclusive ‘circular’ economy; a regenerative, carbon neutral economy, aligned with the Global Goals.
Read more here: Tax as a force for good [pdf]
Has a tax shift been put in practice?
Yes, the tax shift has been put in practice in a number of countries, with great results:
EU examples
In the 1990s and early 2000s, seven European countries took steps to shift the tax burden from labour to energy and transportation: Sweden (initial year of the reforms: 1991), Denmark (1993), the Netherlands (1996), Finland (1997), Slovenia (1997), Germany (1999) and the UK (2001). In total, these reforms increased green tax revenues by more than €25bn annually, for a corresponding decrease in labour taxes. The impacts have been analysed and the associated reductions of carbon emissions have been documented in several studies. The burden for specific energy-intensive industries remained modest (1%-2% increase in energy costs) and the tax shifts generally had a positive effect on economic activity, depending on how the revenues from the green taxes were recycled. Also, the reforms caused employment in some of the countries to increase by as much as 0.5% (Andersen 2007).
Canada
In 2008, the Canadian province of British Columbia began to tax fossil fuel users, ranging from utility companies to car drivers, in exchange for corporation and personal income tax cuts. Since then:
‘the economy has grown by an average of nearly 2 percent a year, despite a big national recession through 2009, outpacing the rest of Canada. The use of gasoline, coal and other carbon-based fuels has dropped 16 percent during the same period, reducing greenhouse gas pollution.’ (Scientific American 2015)
As of 1 April 2018, the carbon tax rate is CAN$35 per metric ton. The tax rate will increase each year by CAN$5 per tonne until it reaches CAN$50 per tonne in 2021 (Government of British Columbia 2018). All revenues are recycled through tax cuts on both labour and capital. An additional tax credit for low-income households has made the carbon tax progressive (Fay et al.), which is an important characteristic of a fair tax shift.
Read more here: Tax as a force for good [pdf]
Is it fair to shift the tax burden?
An often-heard worry is that environmental taxes could increase income inequality: they hit low-income households more, as they pay higher shares of their incomes towards energy- intensive goods. The World Bank notes, however, that it is possible to prevent taxes from increasing income-inequality if the revenues are used to benefit the poorest population (World Bank 2017a).
In practice, plenty of policy options are available to alleviate the impacts on specific households –compensating retired pensioners for the increase in heating costs, for example. Benefits can take the form of (means-tested) tax credits, exemptions, allowances or deductions.
In some countries, cash transfers might ease the transition for the unemployed and those who live in poverty: the right solution will differ from one country to another. If desirable, green taxes can also be made more progressive by applying block tariffs (higher rates for higher use) or a tax-free threshold (eg leaving a certain amount of water or energy untaxed).
In 60 out of the 87 countries reviewed by the World Bank, a US$30/ tCO2 domestic carbon tax would provide the resources to more than double current levels of social assistance in the country (Hallegatte et al. 2016).
Careful design and implementation can alleviate many, if not all of the concerns about discriminatory effects, as the case of British Columbia illustrates.
Read more here: Tax as a force for good [pdf]
What does it mean for business?
Businesses – large and small, and in every sector – have started to explore innovative circular business opportunities. Such activities (including recycling, repair and maintenance services and the redesign of products) tend to require innovation, customisation, more personal attention and customer service than the ‘business-as-usual’ selling of mass- produced goods. When pollution and primary resources are tax-free (or even subsidised) and labour costs are high, entrepreneurs face a barrier to turn their inclusive circular activities into healthy businesses.
As most studies on the circular economy conclude, reducing labour taxes and increasing green taxes will be key to achieving the circular ambitions set by governments and businesses.
The risks and opportunities of a shift are not evenly distributed, but in the face of the environmental and social megatrends such as climate change, water scarcity and social unrest, ‘business as usual’ is no longer an option. Fortunately, innovation and adaptation are in the DNA of business and every sector has opportunities to develop business models that are fit for the future.
Read more here: Tax as a force for good [pdf]
What can I do to help?
Changing a system is not easy and will require broad-based support of policy makers, business leaders, NGOs and the general public. Everyone is invited to join this movement. A few options to act are:
- Sharing our initiative on LinkedIn, Twitter, Facebook or email
- Applying to become a member of UNITED BY TAX
- Stimulating the conversation by talking to your co-workers, family members and friends
- Petitioning your local, regional and national politicians to put the tax shift to work.
We welcome your ideas and support!
