Carbon taxes will not be the panacea national governments are probably expecting and their challenge for the future will be to use tax policy as an instrument of positive change. Using environmental and green taxation to boost falling tax revenues needs indeed careful planning by government and policy makers.

An essential requirement of green taxes is public trust and global synchronisation of tax systems.

First of all, government and policy experts need to strike a balance between the need to raise revenues and the environmental objective underpinning the policy.

In addition, if environmental taxation lacks international co-ordination, it will not impact global pollution levels, as companies will simply relocate and move the pollution problem with them. If measures are implemented unevenly, in one country and not another, it leads to a loss of international competitiveness.

Scrutiny of business’s environmental performance will only increase as we move to a low carbon economy. But business needs policies that are transparent, clear, credible and certain in order to achieve carbon reduction goals.

In a recently published paper called Green taxation in a recession ( , Chas Roy-Chowdhury, global head of taxation at ACCA (the Association of Chartered Certified Accountants) indicated that ACCA is “not advocating tax hypothecation – where a tax is explicitly raised to fund the development of a specific service. Green taxes need to be transparent and unambiguous so the public and business understand what benefits are going to result for the potential pain caused.”

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