2 August 2010
- Green tax breaks just 3.5% of amount raised in green taxes
- Risk green tax breaks could be cut by Office of Tax Simplification
The Coalition Government should redress the imbalance between the huge amount it collects in green taxes and the tiny fraction it gives back in green tax reliefs, according to our research.
Our research shows that green tax breaks are just 3.5% of the amount raised in green taxes. The Government took £31.6 billion in green taxes but gave back only £1.1 billion in green tax breaks in 2009/10 (Further details below).
While the Coalition has already promised to hike green taxes, it has made no commitment to boost green tax breaks, sparking fears that green tax breaks will shrink as a percentage of green taxes.
If the Coalition is serious about tackling climate change it needs to do much more to incentivise environmentally responsible behaviour by boosting green tax breaks rather than simply raising tax on polluters.
Value of green taxes vs. green tax breaks
Roy Maugham, tax partner in our London office, comments: “The Government should redress this huge imbalance between how much people pay in green taxes and the amount they get back through green tax breaks. At the moment it’s all stick and very little carrot. Environmentally conscious taxpayers deserve a fairer reward.”
“There is a concern that the new Office of Tax Simplification will scrap tax reliefs in its quest to simplify the tax system. The Government should consider ring-fencing green tax reliefs from its remit.”
“The gulf between green taxes and green tax breaks is so vast that you have to wonder whether the green agenda is being hijacked simply to swell Treasury coffers. It’s very easy for the Government to relentlessly raise tax under the socially acceptable guise of fighting climate change.”
He adds: “The Government could demonstrate genuine intent by freezing green taxes while significantly boosting green tax reliefs.”
The Government has just announced a £85 million cut to programmes that help businesses reduce their CO2 emissions. Meanwhile, Bob Wigley, the person in charge of setting up the Government’s new “green investment bank”, has made proposals to see businesses pay higher rates and house buyers increased stamp duty if they fail to make their buildings more energy efficient.
Comments Roy: “There is this misperception that green tax reliefs are much more widely available than they are in reality. As the Government gets to grips with the public deficit, there is a real risk that green tax breaks could even be slashed.”
Government revenue from green taxes and green tax breaks
| Green Tax | Green taxes 2007-08 (£m) | Green taxes 2008-09 (£m) | Green taxes 2009-10 (£m) |
|---|---|---|---|
| Hydrocarbon oils duty | 26,585 | 27,182 | 27,580 |
| Air passenger duty | 1,994 | 1,862 | 1,858 |
| Landfill tax | 877 | 954 | 885 |
| Climate change levy | 688 | 716 | 699 |
| Aggregates levy | 339 | 334 | 277 |
| Vehicle Excise Duty bands E, F & G | 155 | 324 | 332 |
| Total | £30,638 | £31,372 | £31,631 |
| Green Tax Relief | Green tax breaks 2007-08 (£m) | Green tax breaks 2008-09 (£m) | Green tax breaks 2009-10 (£m) |
|---|---|---|---|
| Vehicle Excise Duty bands A, B, C & D | 808.6 | 876.5 | 1,019.00 |
| Enhanced capital allowances for energy saving technology | 115 | 100 | 100 |
| Reduced VAT rate for energy saving materials | 50 | 50 | 0 |
| Landfill tax exemption: waste from contaminated land | 55 | 55 | 65 |
| Climate change levy | 575 | 605 | 580 |
| - Reduced rate for participants in Climate Change agreement | 270 | 280 | 260 |
| - Exemption of electricity generated from renewable sources |
80 | 60 | 65 |
| - Supply of taxable commodities not for burning or consuming in the UK |
190 | 225 | 215 |
| - Exemption of energy used in some forms of transport | 20 | 25 | 25 |
| - Exemption of energy supplies not used as fuel | 15 | 15 | 15 |
| Land remediation relief | 30 | 30 | 30 |
| Zero rate of VAT on cycle helmets | 10 | 10 | 10 |
| Negligible green tax reliefs (e.g. landlord's energy saving allowance, ‘cycle to work’ scheme, zero carbon homes relief etc.) |
0 | 10 | 10 |
| Hydrocarbon oils duty: rate differential for biofuels | 110 | 250 | 300 |
| Total | £945 | £1,110 | £1,095 |
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