Tuesday, April 18, 2006

Green tax reforms for the blue party

Dave - if you are serious about going green then here's a few tax reforms to think about. Sharing the proceeds of botanical growth, if you like. But don't use it as an excuse to forget that voters like big leafy income tax cuts most of all.

Just why is there so little tax on air transport, ie zilch tax on aviation fuel. This market distortion encourages flying compared to other cleaner highly taxed forms of transport.

And its time to revisit the way tax relief is given for capital expenditure by business in the UK. Currently certain industry sectors, eg utilities + energy companies pay less tax on their profits than financial and service companies. This is due to tax depreciation rates for their long-lasting assets, which mean that in cash terms their tax rate is considerably less than the standard 30% of their profits. This is effectively a subsidy - which if passed on to customers, means they purchase key natural resouces at a sub-market price. Giving relief for capital expenditure based on actual accounting depreciation rates will not only mean that the tax is fairer across business as a whole, it will remove a distortion that encourages anti-green behaviour.


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