Report calls for green goods tax to replace VAT

VAT should be swapped for a green goods tax that renders environmentally-damaging products more expensive, according to a new report released yesterday.

The Good Product, Bad Product? report by environmental think tank Green Alliance, argues taxes are a vital ingredient in the government’s fight against global warming.

"Very little government policy has been directed at changing the nature of products," the report argued, insisting that the government could incentivise businesses to design more sustainable products by replacing VAT with a goods tax relative to a product's environmental impact.

Green Alliance's waste policy expert Julie Hill said that under the current tax system the market still consistently develops products, such as appliances that remain on standby and unsustainable packaging, that conflict with green goals. "Without the right price signals this pattern is set to continue," she warned.

According to the Green Fiscal Commission, an independent body assessing the issue, green tax revenues have fallen since Blair came to power. Introducing a green goods levy to replace VAT would reverse this trend the Green Alliance report argues, adding that "at the very least a product levy could be used to promote innovation in the areas of energy, water and resource efficiency and recycling".

It calls on the government to begin the transition towards a greener tax system by introducing a levy on wasteful packaging and plastic bags, a move it predicts would win significant public support. "Packaging is the obvious place to start since to many people it epitomises our disposable culture," the report claims.