Dump CRC and commission indie review of green taxes, says CBI

The CBI carried out in-depth interviews with over 70 of its members and found that while businesses generally viewed environmental taxes favourably, the steady increase in the number of them and their increasing use as a revenue-raising exercise meant businesses were becoming disillusioned with the current environmental tax landscape.
It found that businesses view the combination of taxes as not working well together, as being too complex and a drag on business competitiveness. And it concludes that businesses need a more strategic framework and coordinated approach to green taxes.

"With the number of environmental taxes on the increase and proving to be a major revenue raiser for Government, it’s essential that we take stock of the successes and failures from a business perspective," Ian McCafferty, CBI chief economic adviser, said.

"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."

The CBI report, 'Solving a Taxing Puzzle: Making Environmental Taxes Work for Business', finds there is support among businesses for some green taxes, such as the Landfill Tax and Vehicle Excise Duty, but not for others like Air Passenger Duty (APD) and the CRC. 

The research finds the most poorly regarded tax is the CRC. And in a separate report in response to a Government consultation on the scheme published today, the CBI reiterates its calls for it to go. 

"The CRC has become a tax that pretends to be green and does nothing to strengthen the business case to invest in energy efficiency," Rhian Kelly, CBI director for Business Environment Policy, said. "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."

The CRC was set up to encourage energy efficiency among businesses and was initially designed to be revenue-recycling. But Government changes to the scheme mean money raised through it now goes into the Treasury coffers and are expected to raise £1 billion for the Government a year by 2014/15. 

Both the CBI and manufacturers body the EEF have called for the scheme to be scrapped but so far, the Government has only promised to simplify the scheme. In March it launched a consultation on proposals to the scheme, which it says could save businesses £250 million. 

But the CBI and EEF are also concerned about other green taxes such as the Carbon Floor Price. Today’s CBI report on environmental taxes therefore calls for a review by an independent body, such as the Committee on Climate Change or the Office for Tax Simplification.

It also calls on the Government to take a different, more joined-up approach to environmental taxation in the long term and recommends a number of guidelines to follow, including providing certainty to business and making sure simplicity as at the core. 

"The current uncoordinated approach to environmental taxes is not working for business," Rhian Kelly, CBI director for Business Environment policy, said.
"An independent review of environmental taxes has become an urgent priority. 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."