Joined ACCA / The Ex’tax Project report: Governments must redesign the tax system to support the fight against climate change
The tangible effects of climate change are an ever-growing challenge that society has to face. In a fast changing world, tax systems need to adapt too. And tax has an important part to play in tackling the unrelenting pace of climate change.
In a report released december 4 2018 – Tax as a Force for Good: Rebalancing our tax systems to support a global economy fit for the future – ACCA (the Association of Chartered Certified Accountants) calls on governments to rethink the design of the tax system holistically. The report proposes a‘tax evolution’: increasing taxes on pollution and natural resource use, and reducing the tax burden on labour. Specific tax measures, such as a carbon tax, landfill levies or taxes on single-use plastic, may help but they 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.
ACCA’s corporate reporting and tax manager, Yen-pei Chen: ‘Ahead of the 24th Conference of the Parties, we are urging governments to rebalance the tax system to allow countries to meet their carbon reduction targets. Governments need to put a price on pollution and resource-use, starting with abolishing fossilfuel subsidies and pricing carbon emissions. Tax revenues can be used to reduce taxes on labour and increase social protection, in particular addressing the needs of lower-income households.’
Femke Groothuis, president of the Ex’Tax Project: ‘According to the OECD, more than half of all greenhouse gas emissions are related to materials management activities. It is therefore key to shift to a circular economy: a carbon neutral and regenerative model in which products are made to be made again. When pollution and primary resources are tax-free (and even subsidised) and labour costs are
high, businesses face a barrier to scale up inclusive circular activities. Shifting the tax burden from labour to resource-use, including CO2-emissions, will therefore be crucial to achieving the circular and climate ambitions set by governments and businesses.’