Energy tax: it's not all doom and gloom, says Inenco
2016 is set to be another eventful year in energy: tighter supply margins, further implementation of EMR, and rising non-commodity costs despite a bearish wholesale market. Businesses are now armed with ESOS recommendations to be implemented which could drive significant savings, and shrewd businesses will be taking steps now to prepare for P272 and water deregulation and the opportunities these present.
In among the melee of energy policy announcements last year, notably the decision to cull renewable subsidies, the business energy efficiency tax review could give us further reasons to be cheerful. The review aims to simplify and streamline the current reporting headache that businesses face, with overlapping schemes and an excessive administrative burden to handle. A decision is imminent on the review, conducted jointly by DECC, BIS and HM Treasury, which focuses on three main points: overhauling reporting, consolidating taxes, and incentivising investment.
Inenco invited over 100 businesses to have their say on the Government’s proposals: more than three quarters agreed that the current tax and reporting regime needed to change. However, what change best looks like inspired differing opinions from the businesses surveyed. A ‘one size fits all’ approach is almost impossible when it comes to schemes that apply to entirely different sectors. What’s more, unsurprisingly in a revenue-neutral review, there will be winners and losers, with costs removed from one area undoubtedly incurred elsewhere. So what are the popular proposals with the businesses surveyed, and what are the sticking points?
Government is considering whether to introduce one single energy tax to replace the multiple carbon taxes imposed on businesses. The vast majority of respondents agreed that a single energy tax would be preferable.
It is widely expected that this would mean the Carbon Reduction Commitment (CRC) would be scrapped, to be replaced by a single CCL-type tax on consumption, but views on this were mixed: 40 per cent of businesses were unsure whether this would be the most effective solution. Those who disagreed felt that a unit rate-style tax would be more likely to be written off as an obligation, serving as a less effective ‘stick’ to reduce consumption or carbon.
The current tax and levy burden weighs heavily on the power bill, something Government is also considering. A move to re-balance taxes across gas and electricity rates was met with mixed opinion: the majority were unsure whether the current balance is correct, although 40 per cent did at least agree, the lion’s share should remain with electricity if changes are made.
To read the full article, see the latest March edition of EiBI by registering for free here.
