The Climate Change Committee (CCC) has recommended a review of the tax system to support the net zero transition. The report acknowledges the need to introduce some form of road pricing to replace the fuel duty receipts that will gradually disappear as the transition to electric vehicles progresses.
According to Treasury estimates, 4% of UK tax revenues were based on fossil fuel consumption in 2019/20, with fuel duty raising £21bn in 2021. Without tax policy changes, the OBR forecasts that the loss of tax receipts owing to decarbonisation could be £1.8bn in 2025/26.
Penny Simmons, legal director in the tax team at Pinsent Masons, said: ‘Decarbonisation is likely to have a significant adverse impact on UK tax revenues. We need a comprehensive and effective strategy to offset these losses’ where currently ‘there has been limited discussion, particularly from the Treasury’.
“The significant fiscal risks of the economy’s net zero transition are not going away and need to be addressed. Any replacement to fuel duty needs to be simple and easy for the public to understand. Effective communication with the public will be key to the success of any new motoring taxes’, Simmons added.
The Climate Change Committee (CCC) has recommended a review of the tax system to support the net zero transition. The report acknowledges the need to introduce some form of road pricing to replace the fuel duty receipts that will gradually disappear as the transition to electric vehicles progresses.
According to Treasury estimates, 4% of UK tax revenues were based on fossil fuel consumption in 2019/20, with fuel duty raising £21bn in 2021. Without tax policy changes, the OBR forecasts that the loss of tax receipts owing to decarbonisation could be £1.8bn in 2025/26.
Penny Simmons, legal director in the tax team at Pinsent Masons, said: ‘Decarbonisation is likely to have a significant adverse impact on UK tax revenues. We need a comprehensive and effective strategy to offset these losses’ where currently ‘there has been limited discussion, particularly from the Treasury’.
“The significant fiscal risks of the economy’s net zero transition are not going away and need to be addressed. Any replacement to fuel duty needs to be simple and easy for the public to understand. Effective communication with the public will be key to the success of any new motoring taxes’, Simmons added.
