One of the UK’s most influential business groups has called for the government to deliver wholesale changes to the country’s tax regime in order to hit its 2050 net zero target.
Failure to end the freeze on fuel duty for the eleventh straight year, as well as this morning’s announcement that the government is mulling scrapping air passenger duty on domestic flights, have led to fears that the government’s green push could be running out of steam.
‘Polluter pays’ should be at heart of new system
At the heart of this is the “polluter pays” principle: that green taxes should be targeted to a pollutant or a polluting behaviour, especially when there are viable low-carbon alternatives.
This means developing taxes which introduce a price signal into the supply chain to promote alternative, less environmentally damaging behaviour by making alternative options more economically viable.
It also said that policies should be designed so that they do not fall unfairly on those least able to pay for them.
Newton-Smith said: “A tax system which discourages polluting behaviours and rewards greener alternatives is critical to unlocking the right kind of investments.
“It must put carbon reduction above carbon off-setting to send the right signals. And it must ensure that the shift to net zero is a ‘Just Transition’, meaning the cost does not fall to those least able to pay.”
Jason Collins, head of tax at Pinsent Masons, welcomed the CBI’s proposals. “The Government is now committed to net zero by 2050 but not enough movement has been made on the tax front over last decade to encourage businesses and individuals in the right direction”, he said.