Tax policies key to combating global warming and achieving the SDGs

Written by Krister Andersson on 13 February 2020 in Opinion
Opinion

In 2019, scientists warned of even higher rises in sea levels due to accelerating climate change, but few policymakers paid much attention. Instead, we witnessed natural disasters on all continents, writes Krister Andersson, Vice-President of the EESC Employers' Group.

Photo credit: Adobe Stock


We can all see that the human and environmental consequences of extreme weather conditions are serious.

While absolute poverty in the world is at a record low, we need to address not only the environmental issues but also sustainable approaches that can improve health and education, reduce social and gender inequality and lead to sustainable economic growth globally.

Tackling climate change and preserving our oceans and forests are also key to achieving the 17 United Nations Sustainable Development Goals (SDGs).


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Sustainable approaches require that economic policies in general and tax policies in particular are conducive to sustainable growth.

The European Economic and Social Committee (EESC) is contributing to the discussions through an own-initiative opinion, where we have called for investment-friendly and credibility-enhancing policies as a means of closing the investment gap.

Taxation policies are fundamental for achieving the SDGs as they determine the economic environment in which investment, employment, and innovation take place, while providing governments with revenue for financing public spending.

Additional policy alignment and credibility-enhancing measures could do much to increase private investment and close the global investment gap by stimulating capital flows from capital-intense states to developing economies with investment needs.

“Taxation policies are fundamental for achieving the SDGs as they determine the economic environment in which investment, employment, and innovation take place, while providing governments with revenue for financing public spending”

Businesses provide valuable goods and services in economies and are important drivers of investment, productivity, inclusive economic growth, and job creation.

A high percentage of informal economic activity results in narrow tax bases, which reduce the potential for tax collection and increase distortions. Tax bases should be as broad as possible, allowing tax rates to be low and non-distorting.

We are also calling for more transparency in taxation to enhance credibility. Tax rulings should be made in an open and transparent manner. Civil society organisations and parliamentarians need to be held accountable. Governments must be more open about taxes and how they spend public money.

Coherent tax policies that encourage viable economic, social and environmental growth are needed to meet our commitments to the SDGs.

In addition to investment-friendly tax policies, taxes can also be used to discourage activities that harm the environment and encourage sustainable economic development.

Good tax policies can promote affordable, clean energy and encourage responsible use of shared natural resources. Many countries have introduced taxes in this area or have sought to regulate activities that generate greenhouse gases.

The development of new technology may have to be encouraged so as to foster sufficiently rapid innovation in environmentally-sustainable production and transportation and thus combat global warming.

“Good tax policies can promote affordable, clean energy and encourage responsible use of shared natural resources”

Taxes may affect trade patterns. In the wake of the ongoing digitalisation of the economy, new rules on how to allocate taxation rights between countries should be fair for both small net-exporting countries and large consumer countries, as well as for developed and developing countries.

Achieving gender equality is also a significant part of the SDGs. Boosting female participation in society and the economy should be a driver of inclusive economic growth, innovation and prosperity.

The private sector plays an important role in setting wage polices and ensuring workplace training and education that promote equal opportunities between genders.

We support the establishment of the Platform for Collaboration on Tax, involving the International Monetary Fund, the Organisation for Economic Co-operation and Development, the UN and the World Bank Group.

This joint initiative facilitates interaction between the bodies concerned on international tax, making it easier to set global standards, build capacity and provide technical assistance.

Thus, we call on the EU to become a member.

The essential work being carried out by the UN Committee of Experts on International Cooperation in Tax Matters is also contributing to global dialogue, peer learning and the exchange of best practices.

With the climate concerns being so apparent in 2020, we cannot afford any longer to wait and watch. Better tax policies are one important step to enhancing the role of the private sector even further.

About the author

Krister Andersson is Vice-President of the Employers' Group of the EESC and rapporteur for the EESC opinion on "Taxation/private investment and the SDGs - cooperation with the UN Committee of Experts on International Cooperation in Tax Matters"

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