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16 July 2012

Definition of environmental tax published

The Government has today published its definition of environmental taxes. The definition is designed to encourage effective policy making, and also measurement of progress against the Coalition Agreement pledge to increase the proportion of revenue that comes from environmental tax.

Environmental taxes are defined as those which meet all of the following three principles:

Applying these principles, the Treasury has identified the following taxes as environmental, and these will comprise the baseline against which the Government’s commitment to increase the proportion of environmental tax revenue will be measured.

The independent Office of Budget Responsibility currently forecasts the proportion of revenue from these taxes doubling by 2015-16.

Announcing the definition, Economic Secretary to the Treasury Chloe Smith said:

“Today’s announcement is an important step in meeting the Government’s commitments on environmental tax, and our broader determination to be the greenest Government ever. By setting out a clear, usable definition of what a green tax actually is, people will be able to judge us against the Coalition Agreement pledge. Indeed, through ambitious policies such as the Carbon Price Floor, this Government is already on track to double the proportion of environmental tax revenue by the end of the Parliament.

“We want a clear approach that delivers a positive environmental impact without adding burdens onto business or households.”

The Government will also continue to explore opportunities to further green the tax system through the course of the Parliament in a way that is consistent with the aims of tax simplification and deficit reduction.

Notes for Editors

1. The Government recognises that other taxes can deliver environmental benefits, but their aim is not environmental but revenue raising. These are specifically excluded from the Treasury definition and include taxes such as Vehicle Excise Duty, Fuel Duty and Air Passenger Duty.

2. The Coalition Agreement pledged to increase the proportion of revenue raised from environmental taxation by the end of this Parliament. This definition will provide a baseline against which to measure delivery.

3. At Budget 2012, the Office for Budget Responsibility forecast revenue in the coming years from the taxes included in the definition as below:

 

Tax

Actual
Revenue Raised 2010/11

Actual Revenue
Raised
2011/12

 

Revenue Forecast2 012/13

 

Revenue Forecast 2013/14

 

Revenue Forecast 2014/15

 

Revenue
Forecast
2015/16

 

Climate Change Levy

£0.7bn

£0.7bn

£0.7bn

£0.7bn

£0.7bn

£0.8bn

Aggregates Levy

£0.3bn

£0.3bn

£0.3bn

£0.3bn

£0.3bn

£0.3bn

Landfill Tax

£1.1bn

£1.1bn

£1.1bn

£1.2bn

£1.5bn

£1.6bn

EU ETS

£0.4bn

£0.3bn

£0.7bn

£1.5bn

£1.6bn

£1.7bn

Carbon Reduction Commitment

0

£0.7bn

£0.7bn

£0.8bn

£1.0bn

£1.0bn

Carbon Price Floor

0

0

0

£0.6bn

£1bn

£1.2bn

Total

£2.5bn

£3.1bn

£3.5bn

£5.1bn

£6.1bn

£6.6bn

 

 

2010/11

2011/12

 

2012/13

 

2013/14

 

2014/15

2015/16

Total Revenue from Environmental Taxes (£bn)

£2.5bn

£3.1bn

£3.5bn

£5.1bn

£6.1bn

£6.6bn

Total Tax Forecast Receipts (£bn)

£550.8

£570.4

£591.5

£622.5

£658.4

£692.0

Proportion of total tax receipts

0.5%

0.5%

0.6%

0.8%

0.9%

1.0%

Environmental Impacts from Budget 2012 announcements by year

Impact from Budget 2012 (already included above)

0

0

-£15m

+£60m

+£30m

+£30m

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