Circular Economy 2.0 In Practice #4

 

Case #4: The Valued Extracted Tax - tax resources, not labour

 

The Ex'tax Project (or Valued Extracted Tax) is an independent foundation that advocates a fundamental tax shift from labour to the use of natural resources and provides practical tools to help decision-makers transform the policy at the EU level, also called the Valued Extracted Tax.

 

Social Challenges:

Natural resources are getting scarce but people are not. Yet, labour work is expensive due to high taxes, while natural resources remain almost untaxed, resulting in over-exploitation of the earth and unemployment.

 

Business Model:

Increasing taxes on resources brings up the price of the unsustainable products, generating a proper incentive to use resources efficiently. Lowering taxes on labour allows businesses to tap into the abundance of human talents and capacities, such as productivity and creativity, in turn addressing social problems caused by unemployment such as poverty, social instability, economic inequality, health problems…and so on.

 

Circular Economy 2.0 adds the social dimension, to the Circular Economy, by designing poverty out of our system on top of designing waste out:

  • The root cause of our environmental challenges is Waste. Waste is designed out in Circular Economy;

  • The root cause of our social challenges is Poverty. Poverty and Waste are both designed out in Circular Economy 2.0;

Both Poverty and Waste do not exist in Nature as it exists in our Human world. Both should be designed out.

To achieve this, the Circular Economy 2.0 proposes three additional Principles on top of the current three “Safe Circular Principles”(1), these are the “Just Circular Principles” (2), using The Doughnut Economy wording.

 

Circular Equity Principle 4

Higher employment rate could improve income inequality and thus promote equity in the society. Also, shifted financial incentives could enable growth based on human capital, ensuring adequate access to important services such as health and education.

 

Circular Access Principle 5

According to a study published by Ex’tax, with the support of the Big Four accounting firms, the tax reform could increase GDP level by 2%. In all socio-economic groups real income increases. Although there is still a gap among different income groups, the difference is only 0.12% between the first and fifth quintile.

 

Circular Ability Principle 6

The tax shift could place 6.6 million more people in jobs, contributing to higher employment rate and social cohesion and enabling labour-intensive circular business models to utilise manpower.

The ultimate objective of the Circular Economy 2.0 is to Optimize Circular Value (#OCV) since we have now embedded Humans within the model (only Humans perceive Value).

For more information about The Ex'Tax Project: Full Study http://www.neweranewplan.com/

 

(1) The current "Safe Circular Principles" suggested by The Ellen MacArthur Foundation are:

  • Safe Principle #1 "Preserve and enhance Natural Capital by controlling finite stocks and balancing renewable resource flows";

  • Safe Principle #2 "Optimize resource yields by circulating products, components and material at the highest utility at all times in both technical and biological cycles";

  • Safe Principle #3 "Foster system effectiveness by revealing and designing out negative externalities";

(2) In Circular Economy 2.0, we add three socially inclusive principle as we recognize Humans as a valuable assets for our future. We embed them into the concept of Circular Economy thanks to a Humansphere. The additional "Just Circular Principles" are:

  • Just Principle #4 "Equity makes business sense as services could be design to address the needs of all";

  • Just Principle #5 "Developing people's ability promoting any means of exchange is a priority as one should be accessing more with less in a service-based economy";

  • Just Principle #6 "Using labour is innovative as in a systemic regenerative model all abundantly available renewable energies should be considered".

 

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