Policy change on ‘green’ tax is in the air

Date: 29/05/1997

By Tim Jones

FOR years, it has been impossible to piece together a consensus over how and whether to tax environmentally unfriendly activities.

It is just possible that this is about to change with the arrival of a new government in London after 18 years of laissez-faire economics.

Since the Labour Party took power at the beginning of May, British civil servants have spent hours in EU negotiating rooms wondering about the environmental position of their new masters.

But what is already clear is that a Labour government will be much readier to countenance the use of 'green' taxation.

The Institute of Public Policy Research, a think-tank closely linked with the new government, has gone so far as to advocate a commercial and industrial energy tax, higher road fuel duties, increased waste disposal and quarrying levies offset by lower social security charges, value added tax and business rates.

This may never happen, but if even some of it does, it could provoke a revolution in European green tax policy.

In areas stretching from the introduction of an energy tax and 'polluter pays' legislation to harmonising national green levies, the UK has often stood alone among the northern Europeans in opposing new measures.

If that is about to change, the new energy tax proposal from Taxation Commissioner Mario Monti begins to have a chance, and those governments which do not like it will no longer be able to hide behind British obstructionism.

The latest proposal takes a diplomatic approach to win over the opposition - which includes Ireland, Spain, Greece and Portugal - while keeping Denmark, Sweden, Belgium, Austria, Germany and the Netherlands happy.

Monti wants to extend existing minimum rates of excise duty on mineral oils to other energy products, uprating them and applying them to coal, natural gas and electricity.

Electricity consumption would be taxed, but governments would be able to give rebates for the use of 'environmentally preferable' fuels.

A lot less movement can be expected when it comes to establishing a pan-EU system to ensure environmental responsibility, a proposal from Environment Commissioner Ritt Bjerregaard long opposed not only by the UK but also by France and Germany.

Business, supported by these three governments, is adamantly against her attempts to get the 'polluter pays' principle on to the EU law books.

Her only hope is a limited approach which would attempt to fill the gaps in national legislation and concentrate on site clear-up or ecological damage rather than liability for personal injury or damage to property.

Until more European measures are adopted, or strict rules set, governments will continue to adopt their own green levies in a haphazard way which threatens the single market.

When it came forward with a report on environmental taxes in January, the European Commission disappointed everyone with its vagueness.

It proposed allowing member states to choose the fiscal tools to achieve environmental targets while restricting the free movement of goods across EU frontiers as little as possible. But it failed to give a clear-cut commitment to the principle that there should be no discrimination against transportation across internal borders.