Also in 2012, China announced increases in resource taxes on six minerals, including iron and tin ore. Reports attributed the increases to China's policy objective of conserving domestic mineral resources and the environment.2
In February 2013, the US Department of Energy announced USD150 million in Advanced Energy Manufacturing Tax Credits for clean energy and energy efficiency manufacturing projects across the US.3
These are just three recent examples of how governments worldwide are using tax as a tool to address the challenges of social and environmental change.
The global population continues to rise. Billions more people have access to higher-consumption lifestyles. Global food and water supplies are under increasing pressure. Energy supplies are, for many, increasingly insecure and prices more volatile. Material resources are becoming less easily available and competition for them is increasing. Ecosystems are declining, forests are disappearing and the climate is warming.
Governments, in response, are attempting to lower carbon emissions; reduce, reuse and recycle waste; encourage efficient use of water, energy and material resources; and promote green innovation.
They cannot achieve these policy objectives without changing business and consumer behavior; corporations contribute to the challenges and can therefore play a key role in addressing them.
As governments increasingly use tax as a tool to achieve green policy goals and make corporate behavior more sustainable, the global green tax landscape, in the form of both incentives and penalties, is evolving rapidly and becoming more complex.
KPMG International has analyzed 21 countries for this report and found that all of them have green tax systems that warrant attention from corporate tax and sustainability teams. The research identified over 200 individual tax incentives and penalties of relevance to corporate sustainability. At least 30 of these have been introduced since January 2011.
There is evidence to suggest that not all corporate tax teams are fully aware of the landscape of green tax in which they operate and the incentives that may be on offer. For example, in March 2012, Bloomberg BNA surveyed tax accountants and tax lawyers in the US to gauge knowledge and awareness of tax incentives for clean energy.4 Two-thirds of those interviewed were unaware of how US clean energy tax credits work.
This is a concern. As environmental and social challenges gather pace, future business value depends on carving competitive advantage out of complex and unpredictable risks. In most sectors it requires transformational change.
The investments that can drive this change and secure competitive advantage may never be made if green tax systems are not fully understood and used. Investments that struggle to make a case on a pre-tax basis, can flourish after green tax analysis. Business leaders should not underestimate the potential of green tax incentives to deliver efficiency and productivity benefits, drive innovation and contribute to the bottom line.
The KPMG Green Tax Index aims to raise awareness of the rapidly evolving global green tax landscape and to encourage chief financial officers, tax directors and chief sustainability officers to work together in navigating it. Collaboration between the tax, finance and sustainability functions is important to ensure that business makes the right decisions to create future value in a resource constrained world.
KPMG's Global Head of Tax
|Yvo de Boer|
KPMG's Special Global Advisor: Climate Change & Sustainability
1 http://www.japantimes.co.jp/news/2012/09/29/business/green-tax-to-come-into-force-in-october/. Accessed 14 April 2013.
2 http://www.bloomberg.com/news/2012-02-17/china-raises-resources-tax-on-iron-tin-molybdenum-production.html. Accessed 14 April 2013.
3 http://apps1.eere.energy.gov/news/progress_alerts.cfm/pa_id=837. Accessed 14 April 2013.
4 http://www.bna.com/tax-professionals-unfamiliar-pr12884908294/. Accessed 19 March 2013.