KPMG member firms have analyzed the tax systems in these countries to determine the number and range of incentives and penalties that influence corporate activity in relation to nine green policy areas.
Some tax penalties and incentives apply to more than one of the policy areas above. Discretion has been used to decide which section of this report they are covered in. Scores should be taken as indicative, not absolute, in providing a view of governments that are most active in using tax as a green policy tool.
Scores have been attributed to tax penalties and incentives according to arguable value and potential to influence behavior, as follows:
|Tax credits: green specific
|R&D tax credits: green specific
|Tax penalties with direct green application (other than carbon taxes)
|National/international carbon cap-and-trade system
|Capital allowances/accelerated depreciation/deductions: green specific
|R&D tax deductions/accelerated depreciation: green specific
|General R&D tax incentives: not green specific but for which green innovation projects are eligible
|Indirect tax incentives, e.g. value-added tax, excise taxes, customs duty
|Other green specific tax benefits with limited application (e.g. limited flexibility or short-term application)
|Sub-national carbon cap-and-trade system
|Existence of sub-national incentives in any category
Source: The KPMG Green Tax Index, 2013.
The following principles were used to create this Index.
- Points have been awarded or deducted to reflect: the ease or complexity of the incentive claim process; long or short-term availability of incentives; and the flexibility to transfer or carry forward tax benefits.
- Tax penalties score highest because companies cannot avoid complying with penalty legislation.
- Tax credits score higher than deductions and capital allowances. Arguably tax credits are worth more to taxpayers and also cost a government more (as a direct and permanent reduction in tax revenue).
- Penalties or incentives designed for small businesses, households or private individuals are not included.
- Scoring is limited to instruments that are part of a country's tax code, i.e. tax penalties, credits, deductions, enhanced allowances, accelerated depreciation and indirect tax benefits. Many governments use other incentives such as grants, subsidies and soft loans to influence corporate behavior. The Index highlights notable examples where appropriate, but does not score them individually due to the number and fluidity of these programs.
- Scoring is limited to national tax codes although noteworthy examples of sub-national tax penalties and incentives are given in the accompanying narrative.