Civil Engineering Reference
In-Depth Information
Government Taxation
The UK government currently collects around £600 billion in taxes each year. The
lion's share is obtained through taxes on personal incomes and business profits,
and a relatively smaller amount is raised through environmental taxes such as
those charged on waste, carbon usage, pollution and so on. However, the system
of taxation is evolving from simply raising funds to provide essential public services
to altering patterns of private expenditure. As politicians like to say, the burden of
taxation is beginning to shift away from 'goods' such as employment towards 'bads'
such as pollution and environmental damage. In short, modern taxation is being
used to determine the allocation of resources by influencing the final market price of
a good or service. Ironically, if the tax incentive is effective at changing behaviour,
then the government could foreseeably collect less tax as a result. For example, it is
estimated that the current revenue from taxes on motor vehicle use (vehicle excise
duty and fuel tax) could drop by 35 per cent from £38 to £25 billion each year
as motorists switch to electric, hybrid and fuel-efficient cars. In other words, based
on the current tax incentives, the revenue from taxation on motoring is expected
to decline by £13 billion a year by 2029, although the actual level of traffic on the
roads is forecast to increase by 50 per cent in the same period (IFS 2012).
Taxes and subsidies that operate through the price mechanism to create
an incentive for change may be described as a
market-based instrument
, as
theoretically these fiscal instruments seek to internalise external costs into the
price of a product or activity. Interestingly many of the recent examples of taxes
introduced to reduce negative externalities relate to the construction industry.
LANDFILL TAX
The landfill tax was introduced in October 1996. It was imposed to provide an
incentive to minimise waste and promote recycling - to internalise the costs to
the community of waste going to landfill. Depending on the nature of the waste,
the current tax can be as much as £64 per tonne for so-called 'active waste' that
gives off emissions, and £2.50 per tonne for 'inert material' such as concrete
bricks and excavated soil that does not biodegrade. This is potentially a significant
penalty, although in the case of construction the vast majority of the waste is inert
and attracts the lower rate. Currently, slightly more than 100 million tonnes of
construction and demolition waste could potentially end up as landfill - of which
16 per cent apparently is material delivered and then thrown away unused. The
government has indicated that it will make continuous annual increases in the
standard rate of landfill tax, and it is expected to increase to £72 per tonne in 2013.
Although there is some uncertainty regarding the precise amount of construction
waste, it is widely accepted that the industry is the biggest producer of waste
products. Hopefully the increasing rates and targets relating to landfill will send a
clear signal to those working in construction of the need to reduce the external costs
associated with the large volume of waste produced, as well as provide an economic
incentive to develop recycling. In fact, it is interesting to note that the proportion
of waste being sent to landfill in the UK actually decreased by 11 per cent between
2004 and 2008 (DEFRA 2011).
