LBS taxation expert testifies to EU Parliament

Taxes can shape the economic behaviour of companies responsible for high levels of carbon emissions and investments globally.

This was the view of Dr Marcel Olbert, Assistant Professor of Accounting at London Business School, expressed during a European Parliament public hearing on 23 May on ‘The role of tax policy in controlling inflation and promoting sustainable growth in the context of economic recovery’.

Dr Olbert presented alongside Ricardo Martner, Commissioner of the Independent Commission for the Reform of International Corporate Taxation and former Chief Economist at the United Nations Economic Commission for Latin America and the Caribbean, and Anne-Laure Delatte, tenured researcher at the Centre National de la Recherche Scientifique and associate professor at PSL Dauphine University.

Dr Olbert explored recent empirical evidence and remarked on three specific aspects relevant to the hearing: tax loss policy and corporate taxation during crises, multinational firm taxation and global tax reform, and carbon taxes and the response of corporations.

On the effectiveness of carbon taxation in addressing climate change, he argued that taxing carbon is a key policy tool in fighting climate change, but the issue of carbon leakage - the option for multinational companies to relocate polluting operations to less regulated markets - must be addressed.

Further elaborating on this in a Q&A session with members of the Subcommittee on Tax Matters (FISC) that followed the presentation, he said:

“Taxation has two key functions: raising revenue and influencing behaviour. How effective this is, if there are distortions, is up to political debate and research, but tax incentives can be very powerful and they do work.

“Carbon taxes are not present in all countries … There is huge potential for such taxes to have an impact in a good way. They will incentivize companies to redirect their focus on cleaner activities. Taxes have the ability to influence economic behaviour of very important economic agents, in particular companies that are responsible for a great deal of carbon emissions and investments worldwide.

“Environmental taxation must obviously be rightly designed. If the goal is net-zero worldwide, we shouldn’t care about where emissions happen, but we should incentivize companies to reduce their consolidated emissions. In the area of environmental taxation, a key tool should be transparency because we need data and disclosures to inform policy making and hold companies accountable for their actions.”

You can watch Dr Olbert’s testimony in full on the EU Parliament website.