Why taxing labour is outdated

A new tax climate with Ex’tax
PostedJanuary 07, 2015, in  Step 4: continuous improvement
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In 2010, the countries of the European Union together formed the largest economy in the world. To keep ‘Europe’ on track, the member states levy ongoing taxes on businesses and individuals. As much as 52% of that is labour tax; commodities on the other hand are almost untaxed. This system stimulates unemployment (since labour is expensive) and increases the scarcity of commodities (since there is no reason for sustainable use). There are other ways.  

Sustainability financially attractive

‘Shifting taxes away from labour should be a priority for all Member States’, according to the European Commission. The underlying idea: tax commodities instead of labour, because then sustainability becomes financially attractive. Furthermore, the reason for employing as few people as possible, or for exporting labour to low wage countries, disappears. This is not just empty rhetoric, because the Ex’tax is already a fact. 

Source: www.ex-tax.com

Circular economy

In the report New era. New plan the ambitious objectives of Ex’tax are laid out. The project is based on a new vision on economic growth, dictated by the global population growth and increased scarcity of commodities. Fiscal measures are the instruments and a circular economy are the result.  No mean feat and one that requires a long term strategy. Precisely for that reason, in New era. New plan, five solid recommendations are given for the coming years: 

  1. Increase the knowledge of the metabolism of economies. Make integrated reporting the standard, because only then do the financial and non-financial consequences of business activities become visible. All information is put on the table, allowing you to steer effectively.  
  2. Research the macro-economic effects of a tax shift’. Ex’tax has developed a ‘Policy Toolkit’, suitable for carrying out research in different European countries. Not only financial but also (unexpected) effects must be identified.
  3. Carry out interdisciplinary research. The same measure can be assessed differently, depending on the context of the research. Makes sense, because economic, ecological and social-societal criteria each apply their own yardstick. Ex’tax is about taxes but is much more than a fiscal strategy. Therefore, interdisciplinary research is required for insight and overview.
  4. Research the impact from the business perspective. Develop a universal method to identify the effects of a tax shift. Then put this method into practice in business cases to illustrate the effects.  
  5. Develop a European master plan, together with a ‘coalition of the willing.’ Support base is only valuable if this is translated into a concrete strategy. Continue to lobby and mobilise countries that are willing to take the lead. 

Financially neutral

Ex’tax stands for a new vision on levying taxes. It is not about the money but the effect of the money. Ex’tax calls for a financially neutral transformation: in principle, not a penny more is collected in tax. The tax simply comes from another source and inevitably that impacts business operations. We have said it before: sustainability is about much more than just idealism; sustainability is about future proof entrepreneurship. At Ex’tax they have understood that perfectly.   

‘A very thorough report that shows in detail the possibilities for a shift in taxation. It would be wise for the legislator to use these insights to enable both job creation and the transition to a circular economy.’ – Prof. Dr. Herman Wijffels, economist, former Dutch representative at the World Bank.

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PostedJanuary 07, 2015, in Step 4: continuous improvement
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