A review of the tax system to promote the circular economy

The Dutch government’s goal is to be 50% circular by 2030 and to have reduced CO2 emissions by 49% compared to 1990. Ambitious goals that require transitions in various areas. In addition to serious efforts in sectors such as agriculture, transport and the environment, it also requires adjustments in the labor market and in education. However, there are also other factors that work against these goals: financial incentives in the tax system.

Impact of the tax system on circularity
The economy is driven by taxes. If the tax on labor is high, companies will try to keep the number of employees low. When taxes on energy and natural resources are high, they will be used more efficiently. The current tax system is not based on keeping unemployment low and preventing the depletion of our natural resources. That is why the Ex’tax Project is calling for a revision of the tax system to better meet the challenges of our time. This shift is a precondition for creating a circular economy, where prosperity is based less on the use of natural resources and more on the benefits of human resources; sustainable prosperity despite the scarcity of natural resources.



International necessity
The need for adjustments to the tax system is widely recognized both in the Netherlands and internationally. What does a long-term restructuring of taxes look like and what are the effects on the economy, employment, the environment and various sectors? This was already investigated by Ex’tax in the Netherlands in 2014 and 2016 and the urgency is now widely felt within the European Union. An important next step is that the Netherlands, as a leader of the circular economy and the cradle of international tax expertise, will set an example within the European Union on the theme of taxes for the inclusive circular economy.

Key questions
This project provides for a policy exploration, a survey / market research among companies and a communication campaign. The choices and associated calculations can also be included by the political parties in party programs in the run-up to the elections in March 2021.

Three questions are central to the project:

  1. Which adjustments to the Dutch (and ultimately also the European) tax system are necessary?
  2. What are the effects of these adjustments on the economy, employment, environment and different sectors?
  3. Which risks and opportunities do entrepreneurs see if the tax system is adapted to the circular goals? What are the effects for social enterprises and circular business models?

The aim of the project is to provide answers to the above questions in data, visualisations and practical examples, with which policy can ultimately be influenced.

Photo header: timJ

Femke Groothuis - Ex'tax
Femke Groothuis Project Manager