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KPMG Green Tax Index

US Ranks No. 1 Using Tax Code To Shape Corporate Sustainability

KPMG Green Tax IndexThe US ranks No. 1 among 21 countries most actively using the tax code to influence sustainable corporate activity, reflecting the country’s federal tax incentives for energy efficiency, renewable energy and green buildings, according to KPMG’s first Green Tax Index.

Japan, the UK, France, South Korea and China are also among the leading countries using tax as a tool to drive corporate sustainability, according to the index. Key policy areas explored in the index include energy efficiency, water efficiency, carbon emissions, green innovations and green building.

The Green Tax Index gives companies insight into how countries are using taxes to influence corporate sustainability, says John Gimigliano, principal-in-charge of sustainability tax in the Washington National Tax practice of KPMG. He says Japan, for example, ranks No. 1 in promoting tax incentives for green vehicle production, while the US tops the rankings for its renewable energy tax incentives. The result: more electric and alternative fuel cars coming out of Japan and strong growth in the US renewable sector.

The rankings can also help corporate sustainability decision-makers allocate budgets and evaluate global investments around the world, KPMG says. For companies to enhance the return from their green spend, tax and sustainability executives should collaborate before making investment decisions.

The KPMG index identified more than 200 individual tax incentives and penalties of relevance to corporate sustainability. At least 30 of these have been introduced since January 2011.

According to the Green Tax Index, the US tax code provides a range of tax credits, including a production tax credit on renewable energy and tax incentives construction of efficient buildings. The US also uses green penalties less than other Western developed nations apart from Canada. When green tax penalties alone are considered, the US drops to 14th.

Japan is ranked second overall but, in contrast to the US, scores higher on green tax penalties than it does on incentives.

The UK ranks third and has a green tax approach balanced between penalties and incentives. The UK scores most highly in the area of carbon and climate change.

France occupies fourth place in the overall ranking with a green tax policy more heavily weighted toward penalties than incentives.

South Korea ranks fifth, and like the US, has a green tax system weighted toward incentives rather than penalties. South Korea leads the ranking for “green innovation” which suggests that South Korea is especially active in using its tax code to encourage green research and development.

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