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#Circular Economy. From tax on labor to tax on natural resources
Community Community Circular Econ.

The tax system: an essential puzzle piece in the transition to a circular economy

From tax on labor to tax on natural resources. It sounds like a big task, but according to Femke Groothuis, founder of Ex'tax, (Netherlands) that is not so bad. "It is not all that hard, but we have to start."

Ex'tax was founded in 2012 and is committed to a system change of the tax system, to pave the way for circular business models. Femke Groothuis is the founder of this foundation and think tank.
A woman poses for a photo Femke Groothuis

Femke Groothuis is the founder of Ex'tax

Why is it necessary to change our tax system?

"The tax system plays a fundamental role in the transition to a circular economy. It provides extremely powerful financial incentives in one direction or another. These incentives are currently fully in line with a linear economy. "

"The circular economy requires new business models. If we want these business models to be and remain viable, we have to adjust the preconditions. It is therefore time for us to adjust the tax system to the challenges of this century. "

What has to happen?

"Because of the high tax on labor, entrepreneurs are currently saving on people's work, even if this means consuming more raw materials. That is a shame, because we have a huge untapped labor potential, in the Netherlands and worldwide. When you burden natural resources, such as raw materials, water and emissions, you stimulate entrepreneurs to do the opposite. "

"That's important because circular business models are almost always labor-intensive. Think of repair and refurbishment. In addition, we need a great deal of knowledge to design out these new business models. A lot of R & D is needed for that. Circular business models start because of the high tax on labor with a backlog; there is no level playing field yet. "

You have been committed since 2009 to market this body of thought. What have you seen since then?

"Too little. In the Netherlands, the burden on labor has only risen and has fallen on natural resources. That is a shame, because a tax shift offers opportunities. "

"In 2011 we succeeded in getting the big four tax offices (Deloitte, Ernst & Young, KPMG Meijburg and PwC, ed.) At the table. Together we have developed a scenario for the Netherlands: what can a tax shift look like? In 2016, we also examined this at EU level. The chances are gigantic: from billions of savings to more opportunities on the labor market. "

Yet little happens. How is that possible?

"First of all, the short term rules in politics. Changing a system takes many years, but the average age of a cabinet is now two years. That is a problem. The long-term vision is lacking for a circular and inclusive economy. "

"Secondly, working together with other countries is essential to make this transition, but we also find that difficult. We use it rather as an excuse to do nothing and wait for each other. "

"There are many more reasons to come up with. On the one hand, it is striking that nothing happens, but on the other hand it is logical again. We have lived under the assumption that we could continue on the same foot. That is only tilting in the last years. Changing the status quo always hurts a bit. "

"Changing the status quo always hurts a bit". What do you see as the biggest obstacle?

"That we are inclined to talk about measures immediately. That is because you score only one thing in politics: that you know how to introduce something. But this is about so much more: what role does our tax system play in the future? What does our economy look like in the future? Which policy fits the sustainability objectives we have set? "

"You do not answer these questions with separate measures. The underlying system, that must be on the shovel. And that requires a long-term vision. "

What is step one?

"Put a price on pollution. Enter a CO2 tax, enter the water tax, shift the energy tax so that large consumers pay more than the consumer. That is the low-hanging fruit. We can then use the proceeds to reduce the tax on labor. "

"This can be expanded step by step. That is also necessary, because shifts like this cannot take place in one go. We have to discover it, but in order to do that, we have to start. "

What can the business community do to stimulate this transition?

"Companies moving towards a circular economy have to be on the stage together, to let them know what a shift in taxes can mean for them. That is something governments have little idea of. "

"The business world can just become the decisive factor"

After all, governments are strongly influenced by companies, both in a positive and negative sense, and a lot is already happening. For example, hundreds of companies already work with an internal CO2 price. That is not legally required, but they want it. I think that is a very special development and a very strong signal to politicians: 'We expect that CO2 emissions will not stay free.' "

"In addition, the circular economy is now really on the cards in business. That is a huge push factor in implementing the required policy. In quantity, for example, you see enormous growth in circular initiatives. Whether they are or become profitable is a second. We now have to create the preconditions for that. "

What do you expect from the future?

"I am a huge positive, so I believe we will turn the tide on time. I only hope that it is not the shore that turns the ship, but that we make adjustments ourselves on time. If we use our minds, we have made great strides in this area in five years' time. "

"There is an important role for the Netherlands. After all, we have a name in the field of taxation and we have a lot of knowledge. This is therefore the perfect place to start this shift step by step. That requires a bit of daring, but it fits perfectly with the idea of ​​the Netherlands as a circular hotspot. "

What can we expect from the upcoming time of Ex'tax?

"We are launching a new program called United by Tax, together with all parties that support us and support our ideas. The importance of taxation in the emergence of the circular economy must become even clearer, so we will explain and visualize that. Once governments understand the added value better, they are much more likely to help. "

By: Hidde Middelweerd