Chartered Institute of Taxation zero in on Treasury’s ‘net zero’ tax omission

CIOT zero in on Treasury’s ‘net zero’ tax omission

The Treasury should report on the environmental impact of each of its tax measures from now on as part of the massive effort needed by the Government to ensure the UK meets its ‘net zero’ 2050 target, says the Chartered Institute of Taxation (CIOT).

The Government publishes Tax information and impact notes (TIINs)¹ to explain policy objectives together with details of the impact of a tax policy on: the Exchequer; the economy; individuals, households and families; business and civil society organisations; equalities; HMRC and other parts of government; and any other impact.

Occasionally wider environmental impact and carbon assessments are included in TIINs in the final section called ‘other impacts’, though there is no mandatory requirement to show whether environmental impacts have even been considered. The CIOT is calling for the inclusion of ‘environmental impacts’ as a compulsory standalone category for TIINs on all tax policy proposals.

Jason Collins, Chair of CIOT’s Climate Change Working Group, said:

“COP26 showed the urgent and huge breadth of work needed by governments to tackle climate change. The Treasury must harness the power of these tax impact assessments to help the Government develop tax policies that support the achievement of ‘net zero’.

“We are concerned that environmental and climate change risks are treated as an ‘after-thought’ when assessing the impact of a tax policy, and that environmental impacts of taxes are more diverse than those immediately apparent to policymakers.

“It is time for climate and environmental impacts to have their own section in tax information and impact notes. This will ensure that policymakers properly consider such factors in all their decisions.

“This ensures a joined up approach between climate tax policy and wider policy objectives, providing a clear link between tax as a source of revenue and its wider impact in influencing behavioural change. And it will give stakeholders such as tax professionals, campaigners, business and members of the public greater confidence to raise concerns about the environmental impact of tax policies.”

The CIOT made the call for compulsory environmental impacts on TIINs in its submission to the Treasury Committee Inquiry into the Autumn Budget and Spending Review 2021.² It follows the publication of CIOT’s Climate Change Tax Policy Roadmap paper in October 2021³ in which the Institute called on the Government to set out how it plans to use the tax system to help meet its ‘net zero’ ambitions. It is generally agreed that the Government’s Corporate Tax Road Map, published in 2010, was helpful in setting out a clear plan for the intended direction of corporation tax reform at that time, enabling businesses to plan with a better sense of future policy.

The CIOT’s view reflects in general the findings of the National Audit Office’s (NAO) ‘Environmental tax measures – HM Treasury and HM Revenue & Customs’ report published earlier this year.⁴

The Government published its Net Zero Review, an analytical report that uses existing data to explore the key issues as the UK decarbonises. The CIOT is keen to say it welcomes the announcement in that review that the Treasury has formed a net zero directorate for Climate, Energy and Environment. And the CIOT welcomes that the Treasury’s commitment to its recent policy to require government departments to include the likely greenhouse gas emissions generated by bids, and their impact on meeting Carbon Budgets and ‘net zero’.⁵