THE ENVIRONMENT IS NOT AN EXTERNALITY: THE CIRCULAR ECONOMY AND THE TAX WORKING GROUP
Abstract
The final report of New Zealand’s Tax Working Group (‘TWG’) is unusual for this type of inquiry. Rather than restricting its consideration to equity, efficiency and other usual tax criteria in the context of the existing economy, the TWG final report signalled aspirations for a paradigmatic shift in the way the economy is constituted and functions. As well as seeking to incorporate Te Ao Māori (a Māori worldview) and Treasury’s Living Standards Framework, the TWG embraced the radical environmentalism of the circular economy model. As the 2030 achievement target for the United Nations Sustainable Development Goals (‘SDGs’) draws closer, it is increasingly pertinent for policy advisors to ensure their proposals and recommendations align with the SDG ethos. Tax policy is no exception, and the TWG’s explicit consideration of sustainability, wellbeing and the circular economy may suggest an attempt to take New Zealand’s commitment to the SDGs seriously. However, despite its espousal of these features, the TWG’s recommendations for the greening of taxation were modest.
This article considers what the key features of a tax system for a circular economy might be, and assesses the TWG’s recommendations against that model. Particular attention is paid to the New Zealand context, including an economy that is currently greatly dependent on the export of primary products, notably dairy.