Justine McCarthy: Reforming our garbled VAT system would be a good start in the fight against climate change

We know we’re in trouble when it has rained cats and dogs for a whole month of summer and yet the Irish are consoling one another that “we’re lucky we aren’t in Greece”. Or Italy, Tenerife, Cyprus, Mexico, China, the Syrian or Algerian Med, Turkey, Florida, Spain, Croatia, or pretty much anywhere to the right or left of us and below us. The critical mass of sweltering temperatures, wildfires, droughts and floods engulfing vast regions of the world leaves no room for doubt that our planet, as has long been long predicted, is heading for endgame. Theory is translating into reality before our eyes.

World Weather Attribution, a global collective of scientists, has found that human-induced climate change has had an “absolutely overwhelming” role in the unfolding devastation. This is in the same week that the Climate Change Advisory Council has warned that Ireland will fail to meet its carbon emissions reduction commitments unless urgent action is taken. Add radical thinking to urgent action and there may be hope for life on earth yet.

By now, most rational people accept that insatiable capitalism and its faithful servant, indefatigable shopping, are propelling us towards the abyss. Yet governments around the world continue to incentivise those greasy fingers fumbling in the tills while Rome burns. We will wipe ourselves out if we do not stop pandering to this greed, which threatens to be the deadliest of all the seven deadly sins.

Human memory is as fickle as the weather. In another month, when the children are back in school and the leaves are falling from the trees, the talk will turn to the autumn budget and how we should spend the overflowing gazillions in the State’s coffers. Though we will not have forgotten this Earth-scorching summer, we will have become inured to its power to shock us. So we can expect the usual calls for tax cuts for the squeezed middle and that tantalising grand each for people who get up early in the morning. Throw in, perhaps, a permanent VAT reduction for hotels and restaurants and a few bespoke sweeteners for the property sector, and Bob’s your uncle for the vested interests.

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Finance minister Michael McGrath might include some gestures aimed at protecting the environment in his first budget, possibly increasing investment in energy efficiency systems and such like, but it is way past time when disjointed tweaks to the national fiscal approach can masquerade as a joined-up climate change policy. What we need is a total reset of the economic mindset.

It makes no sense to charge the same tax rate for a natural, kind-to-the-environment deodorant as for an aerosol can which is not easily biodegradable and contains propellant gases

The taxation system is where it ought to begin. At present, there are three main VAT rates – 23 per cent, 13.5 per cent and 9 per cent. The middle rate applies to short-term car hire. Takeaway food comes under the 9 per cent rate. Both these categories involve driving vehicles – one of the foremost activities contributing to the greenhouse gases that are warming the climate. The crude classifications of VAT-payable commodities and services are riddled with contradictions. Go to a garden centre and you will pay the same 13.5 per cent tax for a packet of environment-enhancing wild flower seeds as for a bag of peat compost, which strips bog lands of their sequestered carbon. A designer handbag costing several thousand euro has the same VAT as a pair of walking shoes suitable for the commute to work. A hair salon using recycled aluminium foil must pay the same level as a competitor that doesn’t.

Comprehensive eco-tax

The traditional tax philosophy of lumping both luxury goods and everyday necessities in the standard 23 per cent VAT net is outdated and damaging to the natural world. It is time we designed a comprehensive eco-tax system fitted with sticks and carrots to sustain our living world. There can be no argument that private jets, leisure sea craft, super cars, heated swimming pools and designer clothes should carry a higher tax load, but what about spin dryers, one of the most Earth-damaging appliances to be found in any home, fake grass that militates against flood soakage, online shopping and deliveries, room fragrance sprays, floor wipes and laundry colour-separators? It makes no sense, for instance, to charge the same tax rate for a natural, kind-to-the-environment deodorant as for an aerosol can which is not easily biodegradable and contains propellant gases. Is it right to charge the same tax rate for a kitchen table as for a home sauna or a hot tub for the garden?

[ New ‘green VAT’ rates would raise more tax, reduce emissions, researchers claim ]

A redesign of the State’s tax philosophy would require hard work and imagination but it would pay dividends beyond the mere monetary. Research has shown that people in Ireland are conscious of the need to batten down the hatches against climate change but there is great confusion about how, individually, we can do this, short of trying to shop locally and binning plastic packaging before leaving the supermarket. By reinventing the national fiscal approach based on environmental imperatives, consumers would be guided and inspired to do the same. That’s what happened when the plastic bag levy was introduced amid much gnashing of teeth 21 years ago. Now it is culturally ingrained.

Remember how we laughed when teensy-weensy Ireland, exporter of the lucrative Irish pub template, pioneered no smoking in public houses, triggering a global domino effect?

There have been welcome tweaks in the system, such as the lowering of tax on mending and alteration services that are intrinsic to the circular economy. And there are creditable proposals, such as a levy on single-use plastic and takeaway coffee cups which will, inevitably, come into being eventually. But why wait? Why do these things piecemeal when action is urgently needed?

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Some naysayers maintain that it is futile for teensy-weensy Ireland to act responsibly when the mammoth territories of the US and China persist with their polluting rampages. This argument ignores Ireland’s disproportionately large contribution to pollution for its size as well as its financial ability to do something about it. More importantly, it implicitly dismisses this country’s potential to lead the way for other countries. Remember how we laughed when teensy-weensy Ireland, exporter of the lucrative Irish pub template, pioneered no smoking in public houses, triggering a global domino effect?

Where there is a will, there is a way.