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UK Research Shows Green Taxes Ineffective, Unpopular

by Robert Lee, Tax-News.com, London

29 August 2007


In spite of the apparent popularity of taxation as a tool to tackle the UK’s carbon emissions, support for green taxes is only skin deep, according to research published this week by North London-based chartered accountants MacIntyre Hudson. Whilst the majority of people are strongly supportive of the taxes in principle, most of the specific taxes available would be hugely unpopular and, even if introduced, would do little to alter people’s behaviour.

The research sheds an interesting light on the Conservative Party’s plans to replace more established taxes, such as IHT, with taxes designed to improve environmental behaviour. The findings also question the proposals published last week by the Liberal Democrats.

The research found that 78 per cent are concerned about the damage to the environment caused by the UK’s carbon emissions and 70 per cent think that more green taxes will encourage greener behaviour. Two thirds believe that green taxes set at a reasonable level are a good idea.

However, when considering specific areas in which green taxes could be used, few would acquiesce to changing their lifestyles, even where rises are quite high. The majority of people also reject the concept of some of the most recognisable green taxes, including more tax on air travel, rises in petrol duty, higher Vehicle Excise Duty, road pricing for motorway travel and increased VAT on domestic fuel bills.

When questioned about possible increases in Air Passenger Duty, 95 per cent state that a further rise of £10 per ticket would make no change to their travel plans. The research found that heavier increases would lead to some reductions in travel patterns. But with a significant rise of £40 per ticket, 45 per cent would still fly as much as now, and just 15 per cent would make a significant reduction in the number of their flights. Even a penal increase of £80 per ticket would cause under a third (31 per cent) to make significant reductions, with a further 31 per cent cutting some flights and 22 per cent carrying on as normal.

The research also found that any significant rise in Air Passenger Duty is opposed by most people. 61 per cent believe that there should be no further increases. 55 per cent would disagree with even a £10 increase. In the case of more substantial increases the number in opposition rises steadily, with 85 per cent opposing an increase at the level of £80 per flight.

The research casts a similarly cynical light upon the effectiveness of raising fuel duty. 69 per cent believe that there should be no increase. 56 per cent are against an increase of just 5 pence per litre, rising to 90 per cent opposing an increase of 40 pence per litre.

Despite this, 90 per cent would make no change to their driving in the event of a 5p rise in duty. Only at much higher levels would there be significant reductions in car usage. Even at a further 25 pence per litre, 41 per cent would make no change in their driving habits and a further 35 per cent would cut a small number of journeys. Just 24 per cent would make significant reductions or switch to public transport. A penal increase of 40 pence per litre would lead to 43 per cent making significant reductions, but 57 per cent would carry on largely as normal.

Nigel May, Principal at MacIntyre Hudson, commented: “It appears that the many politicians jumping on the “green taxation” bandwagon may be barking up the wrong tree. Although the principle of green taxation is widely accepted, when questioned about specific taxes, that support rapidly falls away. Unless levied at a penal level, people are unwilling to let taxation change their lifestyles. Whilst they will undoubtedly act as an adequate revenue raiser to replace IHT, as in the latest Tory plans, the belief that green taxes are a way to reduce the country’s carbon emissions is sadly misplaced.”

“Before conducting this research, we anticipated that green taxes might be ineffective at low levels and unpopular at higher levels. But we found that, at any reasonable level, further increases would have a remarkable combination of unpopularity and ineffectiveness. The long-held assumption in many areas is that Mr Brown is fully aware that they do not work. If the new Prime Minister introduces green taxation at all, it will be at a level which can raise a bit of revenue under the guise of philanthropy, and low enough to avoid the wrath of the electorate.”

The research also reveals some scepticism in the general support for green taxation, following Gordon Brown’s increase in Air Passenger Duty earlier this year. 80 per cent believe green taxes are legitimate only where the revenue raised is spent directly on environmental improvement, and 74 per cent believe that any increase should be accompanied by reductions in general taxation so that the overall tax burden is not increased.

Even though power generation is the largest single source of carbon emissions in the UK, a remarkable 86 per cent were found to oppose an increase on VAT on domestic fuel. The only possible measures with majority support are further road pricing or congestion charging in urban areas (51 per cent), taxes on non-recycled refuse (63 per cent) and increased VAT on inefficient domestic appliances and white goods (67 per cent).

Patrick King, Principal at MacIntyre Hudson, commented: “Varying VAT on white goods would twist manufacturers’ arms by making producing greener goods a more profitable exercise. This is one green tax that could actually create a positive result using market forces, in contrast with the more commonly discussed green taxes which the research proves to be ineffective and hugely unpopular.”

MacIntyre Hudson LLP is a top 25 UK accounting firm, offering a full range of compliance and advisory services to owner-managed businesses through to multinationals. The firm has 47 Principals and 320 staff situated in 9 offices located across the Midlands, Home Counties and London. The firm is the UK member of CPA Associates International Inc with member firms worldwide, and is registered to carry on audit work and regulated for a range of business activities by The Institute of Chartered Accountants in England and Wales.

The MacIntyre Hudson survey was conducted via an online questionnaire and was completed by 378 people with varying seniority and job function, from businesses across a wide array of industries.


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