Source · Select Committees · Public Accounts Committee
Recommendation 5
5
HMRC has not done enough to evaluate how tax measures with environmental objectives have changed...
Conclusion
HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. HMRC’s monitoring of environmental taxes focuses on tax revenue, but this is not sufficient on its own. For example, falling tax receipts may mean that a tax is effective because businesses are changing behaviour, but it does not tell HMRC what businesses are doing instead and whether that is more or less environmentally harmful. HMRC has not monitored adverse outcomes sufficiently to understand the impact of environmental taxes. It does not monitor the effect of Landfill Tax on the export of waste, and it currently holds no information on levels of fly-tipping, although it had undertaken some analysis which found no correlation with Landfill Tax rates. The range of responses to a tax can be complex. In the absence of good monitoring data, evaluation is needed to understand the range of environmental impacts. HMRC has evaluated only one of the four environmental Environmental tax measures 7 taxes since 2010, in part because its research budget has been limited. HMRC is now planning to allocate an additional £2 million for evaluating tax measures in 2021–22. Recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and whether they are having wider impacts, including unwanted behaviour change.
Government Response
Not Addressed
HM Government
Not Addressed
5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and whether they are having wider impacts, including unwanted behaviour change. 5.1 The government agrees with the Committee’s recommendation. Target implementation date: Winter 2021 5.2 The government agrees it is important that HM Revenue & Customs (HMRC) should ensure it has sufficient information to assess the impacts of environmental taxes, including whether they are achieving their objectives. 5.3 HMRC already uses data and information from various sources to assess whether environmental taxes are achieving their stated environmental objectives and to identify and address unwanted behaviour and risks. For example, this led to the introduction of the Unauthorised Waste Sites measure to tackle non-compliance with Landfill Tax and wider waste sector regulatory requirements. HMRC is also building into the design of Plastic Packaging Tax mechanisms to support effective evaluation of its performance against stated environmental objectives. 5.4 Further activity will need to be considered within HMRC’s overarching approach to evaluation and monitoring. Evaluation can be time consuming and expensive, so the evaluation plans will need to be proportionate, in order to appropriately direct taxpayers' money. And, as the NAO has recognised, it can be extremely difficult to disaggregate the impact of tax measures from other spending and regulatory measures, or other wider factors that drive the behaviour of individuals and businesses. 5.5 Decisions on publication of evaluation and monitoring information are a matter for Ministers.