'Replace UK VAT with 'green' goods tax'

Paul Eccleston, The Telegraph 28 Feb 08;

VAT should be replaced with a goods tax which makes environmentally-damaging products more expensive, according to a new report.

Items like batteries and packaging should be penalised because of the energy and materials needed for their manufacture and the environmental impact they have when thrown away.

While tax concessions for best-in-class products would give both manufacturers and shoppers a financial incentive to do the right thing.

The report Good product, bad product? from the environmental think-tank Green Alliance says that taxes are a vital weapon in the Government's armoury in the fight against climate change and environmental degradation.

It calls for better taxes not more taxes, and urges the Government to follow the example of other EU countries and send a clear price signal that goods which cause damage will cost more.

Last year Gordon Brown announced, with French president Nicholas Sarkozy a plan to lobby the European Commission for reduced rates of VAT on green products. But the reduction or harmonisation of VAT rates across the EU requires the unanimous backing of all 27 EU member states, and the European Parliament has only a consultative role on taxation.

The report claims the way in which products are designed determines a large part of how we use energy, water and resources, and how much is wasted. And products that have delivered so much wealth in the post-war era had also created a 'throwaway' society.

" We look to the Prime Minister to seek support in Europe from like-minded premiers to agree the necessary changes. If a company like Tesco believes that it can label every product with an indication of its carbon footprint then it must be possible to consider environmental impacts as part of the tax system," the report says.

"We can and must start concentrating on products and materials with the biggest environmental impact: from materials that cannot presently be recycled, to the worst-performing products for energy and water use, and construct a price signal that will stimulate innovation.

" A levy could be used to prompt the development of smarter materials that perform well across the board - on energy and water efficiency, resource efficiency and recyclability.

"Packaging is the obvious place to start since to many people it epitomises our disposable culture. It is not coincidence that most international examples of levies seem to focus on packaging, or our other iconic bête noire, the disposable plastic bag."

Julie Hill, Green Alliance's waste policy expert, said: "We have a choice: do we want to continue living with stuff which conflicts with living a low-carbon, low-waste lifestyle or do we want to consume in ways that are smart, pleasurable and sustainable?

"The market still brings forward products that conflict with the Government's own environmental goals, from appliances that can't be taken off stand-by to packaging that can't be recycled. And without the right price signals this pattern is set to continue.

"Other European countries do it so let's tax bads - not goods."