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Home Hot Topics Sustainability & ESG in Taxation

Sustainability & ESG in Taxation

The climate crisis is this century’s biggest challenge and it affects all aspects of the global economy. Policymakers around the world are using various regulatory and market-based tools to facilitate a sustainable and just transition. Taxation is one of them.

In recent years, we have observed an increasing role for taxation in stimulating behavioural change among taxpayers. The European Commission has included a number of tax measures in the European Green Deal, such as the Carbon Border Adjustment Mechanism (CBAM), the Energy Taxation Directive (ETD), and the country-by-country reporting Directive (CbCR). The US Inflation Reduction Act (IRA) is also based on a wide range of tax credits and incentives that are meant to facilitate the US economy's sustainable transformation.

Sustainability has three main dimensions Environmental, Social and Governance (ESG), and taxation is an essential element in each of them.

  • Putting a price on carbon

  • Steering production and consumption choices in a greener direction

  • Incentivising more sustainable investments through tax exemptions

  • Ensuring that the right amount of tax is paid

  • Using tax revenue for infrastructure, education, health care, etc.

  • Ensuring clear tax policies and transparent tax reporting

  • Building trust between tax authorities and tax payers

The role of heads of tax and tax advisors in facilitating the sustainable transformation.

We believe that tax advisors should play a crucial role in proactively building the tax landscape, for the future. Corporate Tax Departments, supported by tax lawyers and tax advisors should ensure that each company’s tax strategy is aligned with the company’s overall sustainability strategy (including all ESG considerations), which in turn should also include the United Nation’s Sustainable Development Goals. Being aware of a company's tax "footprint" (how much taxes are paid, and to whom) and whether this is aligned with the policy intent, having the right risk control and management processes in place, and accepting accountability for the consequences of a company's actions are all part of good tax governance and an integral sustainable tax practice.

At WTS Global, we are on a sustainable journey and our goal is to contribute to the greater good through our own governance as well as our services. That is why we are investing in training our experts, facilitating the international exchange of knowledge through our Climate Protection, Green Tax & Energy Mindset Hub, and ensuring solid local practices in the ESG and taxation fields.

As trusted and leading tax advisors, we need to be aware of the developments affecting our clients and foresee future trends, so that we can help companies prepare for them. This goes beyond classic consultancy: it is the shift the industry is demanding, and we need to move in the same direction as our clients. We seek to be synchronized with the industry’s trends and concerns. It is time to innovate advisory for the greater good: to transform the tax advisory industry following industry’s transformation.

Main Contact
Dr. Karen Möhlenkamp
Partner, Managing Director
Lawyer
Germany
+49 211 20050-817
View Profile
Contact
Inés Blanco de Tord
Lawyer
+32 (0)2 801 30 60
Climate Protection, Green Tax & Energy
View Mindset Hub
ESG and its impact on tax management
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Updates and news on Sustainability & ESG in Taxation

In December 2022, the Council of the European Union and the European Parliament reached a provisional agreement on the Carbon Border Adjustment Mechanism (CBAM). CBAM is one of the EU's climate actions, designed to prevent the offset of the EU's efforts to reduce greenhouse gas (GHG) emissions.

Carbon Border Adjustment Mechanism (CBAM)
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The new Spanish tax on non-reusable plastic packaging came into effect on 1 January 2023. Several documents published by the Spanish tax authorities, as well as a ministerial order published in December 2022, provide new guidelines about compliance with this tax.

The Spanish Plastic Tax has become effective
Read more

Manufacturers and importers of products made of single-use plastic will contribute to the costs of municipal waste disposal in parks and streets in future through a new special levy. Until now, the general public has borne the costs of cleaning up and disposing of carelessly discarded waste. According to the Federal government’s plans, this situation is now about to change. 

Germany introduces a new special levy for products made of single-use plastic
Read more

In the wake of the energy crisis which caused the skyrocketing of fuel prices in Bulgaria the Bulgarian Parliament in its final hours before its probable adjournment and impending new elections adopted a number of tax measures aiming at reduction of consumer energy products prices.

Tax Measures for Tackling the Increasing Energy Prices in Bulgaria
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Tiago Marreiros Moreira and Filipe de Vasconcelos Fernandes of Vieira de Almeida discuss the types of policy objectives aligned with green taxation in Portugal, and predict upcoming changes.

The evolution of green taxation in Portugal
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On 2 March 2022, 175 member states of the United Nations (UN) endorsed a resolution at the fifth session of the UN Environment Assembly in Nairobi to create an intergovernmental negotiating committee to commence work on crafting a legally binding international agreement by the end of 2024 to tackle plastics waste and pollution.

Plastic Taxation in Europe
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The ELTIF is intended to promote long-term investments in the real European economy ('Europe 2020 strategy'). The main objective is to encourage investments in the public domain in order to stimulate job creation, infrastructure development, mobility projects, but also investments in certain unlisted companies or listed SMEs.

The Belgian ELTIF: Ready for launch in 2022?
Read more

Ministerial Order no. 331-E/2021, of 31 December, was published, regulating the  contribution on single-use packaging made of plastic or aluminium purchased in ready-to-eat meals, provided for in article 320 of Law no. 75-B/2020, of 31 December, which approved the State Budget Law for 2021.

Portugal: Contribution on single-use plastic packaging
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The UK plastic packaging tax will come into force on 1 April 2022. The new tax will apply to plastic packaging manufactured in or imported into the UK that does not contain at least 30% recycled plastic. In this context, plastic packaging is defined as packaging that is predominantly made of plastic by weight.

Necessary activities due to the new UK plastic packaging tax starting in April 2022
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The massive expansion of electromobility in recent months is affecting many areas. After electric car purchases had for a long time remained at a low-level, new registration figures for pure battery vehicles and plug-in hybrids multiplied last year. These developments have also led to a need for action in the area of electricity tax.

 

Electromobility’s electricity tax implications in Germany
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23.5 % of total gross electricity generation in Germany comes from wind energy. This article explains the electricity tax obligations for onshore and offshore wind power plants.

Electricity tax for wind farms
Read more

A glance at the EU’s so-called “plastic tax” and the current implementation status of this tax in Germany.

The Plastic Tax in Germany
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The new Spanish Law on Waste and Contaminated Soils restricts the introduction of certain plastic products and establishes both a tax on single-use plastic to prevent waste generation and a tax on waste disposal and incineration.

Spain will introduce for the first time a tax on single-use plastic
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In the  online seminar hosted by Deutsches Verpackunsinstitut (German Packaging Institute), WTS Germany experts and selected WTS Global experts will talk about the challenges that arise for companies in the course of introducing a tax on unrecycled packaging waste as of 1 January 2021.

"Plastic tax in Europe: Who will pay the bill in the end?"
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