Source · Select Committees · Public Accounts Committee
Recommendation 23
23
The March 2021 Budget does not include any new tax measures with environmental objectives but...
Conclusion
The March 2021 Budget does not include any new tax measures with environmental objectives but it does include other tax measures that are likely to have an environmental impact.44 In March 2021 the Office for Budget Responsibility (OBR) said the most significant contributor to the economic recovery measures in the Budget was the introduction of a time-limited 130% capital allowance super deduction from Corporation Tax that will be in place in 2021–22 and 2022–23. The OBR said the deduction provides a very strong incentive to bring investment forward from future periods, supporting economic recovery.45 The deduction is forecast to cost a total of £25 billion in 2021–22 and 2022–23.46 HM Revenue & Customs (HMRC) told us that the capital allowance was available to all businesses in the tax system. We are concerned that the capital allowance is not subject to an environmental or green ‘filter’ and it could lead, for example, to an increase in fossil fuel investments.47
Government Response
Not Addressed
HM Government
Not Addressed
4.1 The government disagrees with the Committee’s recommendation. 4.2 The government agrees that it is important to consider the environmental impacts of relevant tax changes, but disagrees with the Committee's specific recommendation to assess, from Budget 2022, the environmental impact of every tax change considered and publish the outcomes. At this stage, it would not be practical, cost effective or possible to consider detailed environmental impacts for every tax change, such as any changes to the personal allowances for income tax or employer National Insurance Contributions. 4.3 The government does already carefully consider the environmental implications in relevant measures. For example, when considering reforms to the taxation of red diesel, the government assessed that in total red diesel accounts for the production of nearly 14 million tonnes of carbon dioxide a year. The National Audit Office report on environmental taxes highlighted that HM Treasury and HMRC 'use environmental data collected by third parties or feedback from stakeholders to assess impact and inform advice to ministers.' At Budget 2021, the government published an assessment of environmental impact of relevant tax measures - for example in the Tax Information and Impact Note for Plastic Packaging Tax which set out