Transcript Environmental Taxes

Environmental Taxes
Andrew Leicester
What was announced yesterday?
• Two major measures:
• Inflation-rate rise in Fuel Duty: first nominal increase in main
rates since 2003
• Doubling of rates of Air Passenger Duty
• Some smaller ones:
• Extension of Landlord Energy Savings Allowance
• Stamp Duty exemption of “zero carbon” new homes from
2007
• Extension of fuel duty discounts to new alternative fuels
• And some things to come
• Expected increase in Landfill Tax pre-announced
• Some movement on VED and Company Car Tax in Budget?
2007/8
2006/7
2005/6
2004/5
2003/4
2002/3
2001/2
2000/1
1999/0
1998/9
1997/8
1996/7
Revenue as % of GDP
How green is Brown?
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Source: IFS
How green is Brown?
Fuel Duty
3.5%
3.0%
VAT on Duty
2.5%
2.0%
Resources
1.5%
Energy
1.0%
0.5%
APD
2007/8
2006/7
2005/6
2004/5
2003/4
2002/3
2001/2
2000/1
1999/0
1998/9
1997/8
0.0%
1996/7
Revenue as % of GDP
4.0%
VED
Source: IFS
pence / litre
Real Fuel Duty (unleaded)
100
90
80
70
60
50
40
30
20
10
0
05/97 05/98 05/99 05/00 05/01 05/02 05/03 05/04 05/05 05/06
Source: IFS, DTI
pence / litre
Real Pump Price (unleaded)
100
90
80
70
60
50
40
30
20
10
0
05/97 05/98 05/99 05/00 05/01 05/02 05/03 05/04 05/05 05/06
Source: IFS, DTI
pence / litre
Importance of tax in pump price
100
90
80
70
60
50
40
30
20
10
0
Pre-tax
Tax (duty + VAT)
05/97 05/98 05/99 05/00 05/01 05/02 05/03 05/04 05/05 05/06
Source: IFS, DTI
Fuel duties since 1997
• Fuel duty vastly most important component of
environmental tax revenue
• decline in real duties mirrors decline in real total to
2006/7
• Real fuel duty for fuels most people buy peaked in
mid-2000
• Before yesterday, had fallen by around 18%
• 1.25p rise means real rates still 16% below peak
• Increase in fuel duty of 16% raises around £4bn
• Real fuel duty increases unlikely going forward
Air Passenger Duty
Current Rate
EEA
Other
Economy Class
£5
£20
Non-Economy
£10
£40
New Rate: Feb 2007
EEA
Other
Economy Class
£10
£40
Non-Economy
£20
£80
A change of heart?
• 2003 Aviation White Paper:
“.. Because of its blunt nature, APD is not the ideal
measure for tackling the environmental impacts of
aviation.”
• 2006 Pre-Budget Report:
“While we continue to work internationally to seek a
global agreement on reducing aviation emissions,
each country must take action domestically.”
A blunt instrument?
• No other real domestic policy lever
• inclusion of aviation in EU ETS some time
away
• international agreements needed for fuel
taxes
• APD varies by distance (sort of) but not
emissions of aircraft, departure airport etc.
• Higher APD reduces passenger numbers –
not necessarily flight numbers
• Reform tax to a tax on flights rather than
passengers?
Is APD regressive?
10
9
8
7
6
5
4
3
2
1
Income Decile
Change in income
0.00%
-0.02%
-0.04%
-0.06%
-0.08%
-0.10%
-0.12%
-0.14%
Source: ONS
A pointer for Budget 2007
• PBR announced increase in standard Landfill Tax
rate to £24/tonne in April 2007
• Considering more rapid increases from 2008, or
higher “medium-term” target than £35
• Tax rate should be determined by external costs of
landfill
• Initial tax rate (£7) based on estimates of externality –
have they grown so much?
• Tax rates seem designed to help UK hit EU Landfill
Directive
• tax may be best way to hit target but …
• target ‘too severe’ relative to economic costs of
landfill?
Conclusions
•
•
•
•
Greener PBR than recently …
… but not that green!
No real pointer for policy beyond 2007/8
Nothing to suggest green tax revenues on a
steady upward trend
• More to come in Budget 2007? Consultation
on new green tax measures?