UK fails to contribute to EC debate on taxes and environment

An invitation by the European Commission for ideas on how a greening of the taxation system could help to promote economic revival has been spurned by the UK. In its response, the UK has focussed on deregulation and devoted not a single word to environmental taxes.

The invitation was made at the EC summit in June, when Commission President Jacques Delors announced that a White Paper on growth, competitiveness and employment in the EC will be published by the end of the year. Member States were asked to contribute ideas for the White Paper by the end of August.

One of the ideas put forward in a paper by M Delors was that the EC's competitiveness could be improved by shifting the burden of taxation away from incomes and onto to natural resources. The proposal coincided with moves in Belgium and Denmark to introduce a wide range of eco-taxes. In Denmark in particular, the revenues will pave the way for cuts in income taxes (ENDS Report 221, pp 39-40 ).

The UK has now responded to the Commission's invitation with a paper prepared by the Treasury and the Department of Employment. The document concentrates on the damaging effects on the EC's competitiveness caused by inflexibility in labour markets, social security and health care costs, the economic burdens of regulation on business, and protectionism in international trade.

Environmental protection is mentioned only in passing, and then only as a source of costs on industry. The EC Treaty's objective of raising the quality of life, the paper says, is an aspiration, not an entitlement.

Stressing repeatedly the need for deregulation, the UK's paper urges the Commission to carry out an audit of the impacts on business of existing EC legislation, as well as systematic cost-benefit analyses, based on a rigorous methodology, of future legislative proposals "likely to have the greatest impact on business - especially environmental and social measures."

Meanwhile, a more detailed insight into the Commission's thinking on taxation and the environment has emerged in an invitation to tender for a research contract issued in August. The goal of the one-year study will be to identify all the existing or proposed taxation measures among the Member States which have a direct or indirect effect on the environment.

The findings will be used, the tender document says, to reorientate tax systems "in a direction more friendly towards the environment, the basic idea being that it is necessary to shift the tax burden within the EC from activities that should be encouraged - like work, savings, investment and risk-taking - onto activities that should be discouraged, like resource waste, pollution and congestion. Taxes on these environmentally damaging activities would not distort economic decisions, but rather would correct existing distortions."

National tax provisions to be identified in the study will include personal and corporate taxes which encourage or discourage environmentally beneficial activities, as well as taxes - and subsidies - on motor fuel, vehicles, energy products, and specific goods such as agrochemicals, batteries and beverage containers. The Commission also wants to know about taxes or tax reliefs with an indirect impact on the environment, such as those which promote intensive agriculture, increased commuting or higher waste generation.

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