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Another Report Doubts Effectiveness Of UK's Green Taxes

by Robert Lee, Tax-News.com, London

04 September 2007


Another new report has cast doubt on the effectiveness of green taxes at changing behaviour in the UK, with the campaign group the Taxpayers' Alliance (TPA) claiming that the government is raising GBP10 billion more in tax revenues than it needs to cover the cost of the UK's carbon footprint.

On September 2, the TPA released what it is believed to be the first audit of environmental taxation in the UK, alongside a new YouGov poll of more than 2,000 adults (double the usual sample) commissioned into public attitudes towards green taxes.

The report suggested that every UK household is paying GBP400 more than is necessary in green taxes every year, while the poll showed that the majority of respondents were of the view that green taxes are being used by politicians to raise revenue rather than tackle environmental damage.

The study covered the main “pollution taxes” of fuel duty; vehicle excise duty (road tax); the Climate Change Levy; Air Passenger Duty; the Landfill Tax and the EU Emissions Trading Scheme, all of which it asserted are "seriously flawed".

The report argued that:

- Fuel Duty and Vehicle Excise Duty, net of spending on roads, are already between three and forty times higher than the level needed to ensure that drivers cover the official and academic estimates of the social cost of CO2 emissions This means that each motorist is overpaying by between GBP548 and GBP743 each year.

- Under the Climate Change Levy, the North East, England’s poorest region, pays over 35% more as a proportion of regional Gross Value Added, than the South East, England’s richest region outside London.

- The doubling of Air Passenger Duty announced in last year’s Pre-Budget Report is actually likely to have increased total emissions from air travel, incentivising longer flights within the short-haul and long-haul bands.

- The Landfill Tax, which has been increased a number of times by the current government, is already raising up to GBP620 million more than would be sufficient to meet the social costs of methane emissions from landfill. Planned new bin taxes are likely to represent yet another supplementary charge on stretched household finances.

- The EU’s Emissions Trading Scheme has resulted in a GBP470 million subsidy from the UK to the majority of EU countries that have not placed strict targets for overall reductions in emissions.

The report concluded that in many cases, individual green taxes and charges are failing to meet their objectives, are set at a level in excess of that needed to meet the social cost of CO2 emissions, and are causing serious harm to the areas of the country and industries least able to cope. It calculated that Britain’s entire output of CO2 was GBP11.7 billion in 2005 but in the same year, the total net burden of green taxes and charges was GBP21.9 billion.

Furthermore, the YouGov poll showed that most Britons believe politicians are not sincere on green taxes, the TPA said. When asked what they thought the primary motivation was for new green taxes, 63% agreed with the statement: “Politicians are not serious about the environment and are using the issue as an excuse to raise more revenue from green taxes.” Only 20 % thought that “Politicians are serious about the environment and are bringing in new green taxes to change people’s behaviour to help reduce carbon emissions”. The majority (77%) disapprove of local councils placing extra charges for bin collection on top of council tax to encourage recycling, including two thirds (65%) who would “strongly disapprove”.

Fuel Duty and Air Passenger Duty are seen by the public as unfair taxes, the poll indicated. 60% think that Fuel Duty is an unfair tax, compared with just 17% who think it is fair. 45% believe that Air Passenger Duty is unfair, compared with 23% who think it is fair. The poll also cast doubt on the effectiveness of taxes at making people think twice before they fly. When asked how much extra air passenger duty would have to cost before they chose not to fly, more than two thirds (71%) of those questioned stated that they would only stop flying if Air Passenger Duty was trebled from its current rate. If politicians only doubled it, 81% of people would still choose to fly.

“The public are right to suspect the motives of politicians," said Matthew Elliott, Chief Executive of the TaxPayers’ Alliance. He continued: "Not only are they split on whether new green taxes are a good idea, but our research proves that politicians have been using green taxes as a revenue-raising measure and are cynically trying to win support for new ones by exploiting concern about climate change. We need more honesty about the costs of extra green taxes when British taxpayers already pay some of the highest pollution charges in the world.”

Corin Taylor, Research Director of the TaxPayers' Alliance added: “Green taxes and charges impose substantial costs on, amongst others, Northern manufacturers and the NHS. Green taxes in the UK are already well in excess of the level they need to be to meet the academic estimates of the social costs of carbon emissions. Every household is paying more than £400 extra in tax every year because green taxes are set too high. UK taxpayers are already more than doing their bit to pay for the costs of pollution and additional green taxes would be completely unjustified.”

A report published last week by North London-based chartered accountants MacIntyre Hudson came to a similar conclusion. It found that while the majority of people supported green taxes in principle, few would acquiesce to changing their lifestyles, even where rises are quite high.


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