The CBI has published a report calling on Government to undertake an independent review of its existing environmental tax landscape. The CBI has also responded to DECC’s consultation over a Simplified Carbon Reduction Commitment (CRC) Energy Efficiency Scheme where the organisation urged Government to scrap CRC and switch to mandatory carbon reporting.

The CBI’s recommendations are built on the back of over 70 in-depth interviews carried out on its members. The report, Solving a Taxing Puzzle: Making environmental taxes work for business, reveals that firms believe that environmental taxes can actually help stimulate business investment, drive private sector growth and reduce the environmental impact of business activity.  

The research shows that a number of high-profile environmental taxes such as the Landfill Tax and Vehicle Excise Duty, have served as success stories. However, other taxes, such as Air Passenger Duty and the Carbon Reduction Commitment, are viewed in a negative light.

Ian McCafferty, CBI Chief Economic Adviser, said: “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.

“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 most poorly regarded tax is the CRC, which the CBI claims is not working to encourage business energy efficiency at all, but rather serves as an overcomplicated revenue-raising instrument, which is simply being written off as a cost of doing business in the UK.

Rhian Kelly, CBI Director for Business Environment policy, said: “The CRC has become a tax that pretends to be green and does nothing to strengthen the business case to invest in energy efficiency. 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.”

As a result, the CBI are calling for a complete shakeup of the existing environmental taxation landscape, starting with an urgent review of all environmental taxes by an independent body, such as the Committee on Climate Change.

To help focus Governmental policy, the CBI has identified six fundamental business guidelines for any new or changed environmental tax:

–            To have a clear purpose and definition;

–            To take strategic fit into account;

–            To be designed with simplicity at their core;

–            To offer comprehensive communication and advice;

–            To provide certainty to businesses;

–            To ensure a strong, ongoing justification.

Kelly concluded: “The current uncoordinated approach to environmental taxes is not working for business. 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.”