AMSTERDAM: More jobs and clever use of resources, that’s exactly what this era needs. A brief employment impact analysis shows that a tax shift potentially creates hundreds of thousands of jobs, in the Netherlands alone.
The policy toolkit is applied to the first case study, reviewing a potential budget-neutral tax shift of $ 42 billion in the Netherlands. If this scenario were to be applied internationally across Europe, it would mean a tax shift of more than $ 900 billion.
In the 28 countries of the European Union, on average, more than fifty percent of government budget is based on labor taxes (income tax, payroll tax and social contributions). In the United States this percentage is even higher. Only a fraction of all tax revenues is raised on pollution and natural resource use (including water, metals and minerals).
To make matters even worse, pollution is subsidized across the globe. The IMF estimates that global ‘Environmentally Harmful Subsidies’ (tax breaks and lower tariffs for fossil fuels) amount to $ 1.9 trillion per year. In short: the polluter doesn’t pay.
A growing number of businesses are disclosing environmental information in their annual reporting. In practice, however, CFOs are struggling to make the business case for sustainable products and services, as they can hardly compete with options based on tax-free primary resources and subsidized fossil fuels.
Not surprisingly, businesses are more concerned about reducing the number of employees than reducing their ecological footprint. Gaining efficiency generally means making people redundant and outsourcing labor-intensive activities to low-income countries. High labor costs are also holding back labor-intensive R&D efforts.
Unemployment is now rampant, causing poverty and health problems. Unemployment denies people the opportunity to participate in society and to develop their full potential, undermining human dignity. From an economic perspective, unemployment means that human capital is underutilized.
Economists across the political spectrum have called the principle of a tax shift from labor to natural resources a ‘no-brainer.’ In practice, however, a shift poses considerable challenges. Many environmental problems are cross-border issues, and require international coordination, for example. Also, there have been doubts about the stability of green taxes, and there are still a lot of questions about the effects on businesses.
Invited by The Ex’tax Project, tax experts of Deloitte, EY, KPMG Meijburg and PwC have formed a working group to contribute to the challenge of adapting our tax systems to 21st century needs. Their study new era, new plan, fiscal reforms for an inclusive, circular economy have now been published.