Clarity is needed on green taxes

Some energy companies use artificial tax avoidance to reduce their liability

Share

All taxes are unpopular, and some taxes are more unpopular than others. But they are a necessary means of paying for things that we value collectively and that we are unable to provide for ourselves. Our report today that two energy companies have used a loophole to avoid tax brings together two current concerns: one is the rise in gas and electricity bills and the part played by green taxes in making them higher; the other is the way that large companies use artificial devices to reduce their tax bills.

This newspaper supports green taxes and opposes tax avoidance, which may sound like supporting motherhood and opposing sin, but we know that both are harder to sustain than they look.

Green taxes have become unpopular, as our ComRes poll showed last week. Even when we understated the "green" element of energy bills, and suggested that "it is worth paying an extra £2 in every £100 on gas and electricity bills to pay for greener energy", only 34 per cent agreed and 45 per cent disagreed. As we explain today, as much as £9 in every £100 of energy bills actually goes towards green or social objectives, and there is some overlap between the two, such as help for old people with home insulation.

Indeed, the several levies and the schemes for which they pay need to be simplified, and the Prime Minister's promise last week to "roll back" green taxes is sensible if it means bringing some clarity to the mess. One scheme, for example, for "hard to help" rural households, costs the companies more in finding households to help than it does in actually helping them.

The principle of green taxes is right, and it should not be hidden behind schemes to be nice to old people or in piecemeal subsidies for solar panels. The Independent on Sunday has long argued that the most efficient way to mitigate climate change is to make carbon fuels more expensive. If this hits poor people, they should be protected out of general taxation, rather than by adding to the household bills of the rest.

That would make it easier to have a rational debate about the level at which such taxes should be set – not so high as to make Britain uncompetitive, but not so low as to fail to influence behaviour.

Currently, the total tax burden on energy is lower than it could be because some of the energy companies use artificial tax avoidance schemes to reduce their liability. Our investigation with Corporate Watch into the use of the "quoted eurobond exemption" has found that two energy companies appear to have used it to avoid paying more than £100m in tax. The exemption was granted in 1984 to encourage investment in British companies, but it seems that it is abused by parent companies making loans to subsidiaries at unusually high interest rates.

The Government should close this loophole, of course, but we recognise that this would add to the tax burden on companies, including in the energy sector. Again, our argument is that greater clarity would make it easier to decide the right level of taxes.

The criticisms of coalition policy from Ed Miliband and Sir John Major, and the apparently improvised response by the Prime Minister, now promising an annual review of competition in the industry, offer a chance to get to the bottom of whether the energy companies really are making excess profits – and, if so, how they should be taxed. That can only be a good thing.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Online Media Sales Trainee

£15000 - £30000 per annum: Recruitment Genius: Now our rapidly expanding and A...

Recruitment Genius: Public House Manager / Management Couples

£15000 - £20000 per annum: Recruitment Genius: Are you passionate about great ...

Recruitment Genius: Production Planner

£20000 - £30000 per annum: Recruitment Genius: This fast growing reinforcing s...

Recruitment Genius: General Factory Operatives

£18000 - £35000 per annum: Recruitment Genius: This fast growing reinforcing s...

Day In a Page

Read Next
 

If I were Prime Minister: Every privatised corner of the NHS would be taken back into public ownership

Philip Pullman
 

Errors & Omissions: Magna Carta, sexing bishops and ministerial aides

John Rentoul
As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links