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Impact of Environmental Taxes on Taxpayers’ Behaviour


   Faculty of Management, Law and Social Sciences

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  Dr Muhammad Khawar  Applications accepted all year round  Self-Funded PhD Students Only

About the Project

Various techniques are adopted by tax payers to reduce their tax bills (Hanlon and Heitzman, 2010) and the tax collections are a source of revenue for a government. Various public bodies manage taxes for the UK government including HM Revenues and Customs (HMRC) which is an administrative department of HM Treasury. Every year HMRC discloses a tax gap between the theoretical expected tax collections and the actual tax collections which amounted to £31bn for the tax year 2018-19 arising from various activates of tax payers including tax avoidance (HMRC, 2020). HMRC has managed to reduce the tax gap consistently over the past years by controlling the benefits associated with the non-compliant tax behaviour; however, National Audit Office (NAO) has recommended HMRC to reduce tax gap be developing approaches that change the taxpayers’ behaviour (NAO, 2020).

In contrast to the main revenue generating objective of the taxation policy, HM Treasury implements four indirect environment taxes to change tax payers’ behaviour as part of the government’s fiscal policy (a fifth environmental tax is planned to start from April 2022). These taxes are imposed on intermediary organisations who then pass these taxes on to the taxpayers for example, Landfill Tax is imposed on 150 Landfill Operators in the country. Lower tax collections for such taxes may indicate success of the underlying objectives of these taxes. However, a reduced tax collection beyond the expectations may also indicate tax evasion or other illegal tax behaviour. For example, tax gap for Landfill Tax was the largest gap by percentage (28.4%) in the tax year 2018-19. Success of the environmental taxes should be measured against the underlying environmental policy of the government i.e., changing the end consumers’ (taxpayers) behaviour and to a more environment friendly behaviour. HMRC’s tax gap analysis is not helpful in measuring such behaviour as it is mainly focussed on the revenue instead of any impact generated by these taxes (NAO, 2021). 

The government has set its environmental objectives to reduce the greenhouse gas emissions to a net zero by 2050. Various environmental taxes are imposed by the government generating 51.6bn revenue for the government and two third of such taxes are managed by HMRC. In addition to the four environmental taxes aiming at changing the end users’ behaviour, other taxes may have behaviour implications that are not observed by HMRC (NAO 2021). To help the government in achieving its environmental objectives, it is important to identify and measure the environmental impact of any taxes implemented by the government (managed by HMRC or other public bodies) which is a gap in the current practice.

A study measuring effectiveness of the relevant taxes may inform the relevant policy makers in designing any new environmental taxes or revising the existing ones. This study will start with a wider analysis of the role of taxation in achieving environmental policies in the UK followed by an analysis of the behavioural impact of the relevant taxes i.e., taxes classified by the government as environmental taxes aiming at changing taxpayers’ behaviour, environmental taxes with no such aims, and other taxes with indirect impact on taxpayers’ behaviour impacting environment. The study may analyse the impact of such taxes on the intermediary organisations. This study is equally suitable for candidates with background in Accounting, Finance and/or Economics and interest/awareness/knowledge of the UK taxation system.


Funding Notes

This is a self-funded PhD project; applicants will be expected to pay their own fees or have a suitable source of third-party funding. UK students may be able to apply for a Doctoral Loan from Student Finance for financial support.

References

Hanlon, M., Heitzman, S., 2010. A review of tax research. Journal of Accounting and Economics 50(2), 127-178. https://doi.org/10.1016/j.jacceco.2010.09.002.
HMRC. 2020. Measuring Tax Gaps (2016 ed.). available at: https://www.gov.uk/government/statistics/measuring-tax-gaps. (accessed on: 30 August 2020).
NAO. 2020. Tackling the tax gap. available at: https://www.nao.org.uk/report/tackling-the-tax-gap/. (accessed on: 1 August 2020).
NAO. 2021. Environmental tax measures. available at: https://www.nao.org.uk/wp-content/uploads/2021/02/Environmental-Tax-Measures.pdf. (accessed on: 12 February 2021).
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