Ex'tax in EU Parliament Resolution

20 May 2015

With the help of MEP Gerben Jan Gerbrandy, The Ex’tax Project has successfully put a tax shift on the agenda of the European Parliament. The tax shift was included in the SME resolution adopted by the Parliament on April 15, 2015.

Full employment and social cohesion are basic EU objectives. The European Union has also committed itself to ambitious environmental goals such as reducing greenhouse gas emissions by 40% and increasing energy efficiency by 27% by 2030. According to the Commission, better eco-design, waste prevention, recycling and reuse could bring net savings for EU businesses, estimated to represent up to EUR 600 billion.

Small and Medium Sized Enterprises (SMEs) account for more than 98% of Europe’s businesses and provide more than two-thirds of total employment in the Union. SMEs therefore have an important role to play in fulfilling the targets.

The European Parliament resolution on green growth opportunities for SMEs was adopted April 15, 2015 to develop support measures in areas such as financing, knowledge management, innovation and skills and deregulation.

MEP Gerben-Jan Gerbrandy (D66, Netherlands) has successfully put forward proposals on Ex’tax, amending the earlier draft resolution. The amendments were overwhelmingly approved by the plenary. The SME proposals now include a call to assess the impact of a tax shift from labour to natural resource use:

[The European Parliament] “Recalls that SMEs can be expected to play an important role in the circular economy, providing sustainable, yet labour-intensive services such as repair, refurbishing and recycling; considers that a tax shift from labour to natural resource use is a prerequisite for the long-term success of SMEs; notes that the Commission, the Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), the International Labour Organisation (ILO), Parliament and the Eurogroup broadly support the principle of a tax shift from labour to natural resource use and consumption; requests that the Commission assess the impact of a tax shift from labour to natural resource use;

This is a step in our journey towards a tax system that is suitable for the challenges of the 21st century; building a European Union that works because it’s 500 million citizens have a chance to work, develop their skills and provide for their families, while keeping in tact the natural resources upon which prosperity is built.

Background

Although full employment is a basic objective of the European Union, high labour taxes and social contributions currently give businesses the incentive to employ as few people as possible and to outsource to low-income countries. High labour costs also inhibit innovation, as innovation is labour-intensive. SMEs are particularly susceptible to high labour costs.

Low environmental taxes, on the other hand, are a barrier for businesses to implement and scale up sustainable business models. Sustainable solutions can hardly compete with tax-free natural resource use and subsidized fossil fuels. Global subsidies to fossil fuels amount to €4.74 tn a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary FundFor the European Union, fossil fuel subsidies are also substantial at US$330 billion per year.