KPMG’s Advice to Companies on Taxation & Circular Economy

Many businesses are talking about the circular economy as part of their ESG strategies
As part of KPMGs Responsible Tax Project, a new paper ‘Taxation and the Circular Economy: What it means for business’ explores tax, tariffs & incentives

Circularity is something we see fairly often in sustainability strategy – companies looking to reduce waste and pollution. As a world looking to reduce its impact, a circular economy is something to strive for.

However, the tax tariffs and incentive levers can be a minefield.

In a bid to support companies looking to understand circularity and regulation further, KPMG’s paper titled ‘Taxation and the Circular Economy: What it means for business’ considers what tax, tariffs and incentive levers are being used or proposed to drive a more circular economy and at what stage they might be applied in the life cycle of certain goods.

KPMG follows the Ellen MacArthur Foundation definition of the circular economy, “to be one based on the following three key principles:
  • Eliminate waste and pollution
  • Circulate products and materials (at their highest value)
  • Regenerate nature”

As governments work to support and speed up the transition to a circular economy, KPMG is supporting businesses in understanding the taxes, tariffs and reliefs/subsidies that are involved.

“For example, policies focused on waste increasingly consider the entire lifecycle of products, [so as] to avoid simply displacing environmental burdens to different lifecycle stages or from one environmental medium to another,” the paper says.

“Some academics have presented a taxation framework which considers the whole lifecycle of products and the different types of taxes/subsidies that have been implemented across that product lifecycle — production, product use and end-of-life waste management. This framework has been used to facilitate discussion of tax legislation and the circular economy by government policymakers.

“Businesses need to navigate this changing landscape.”

A Circular Economy

Circular economy at KPMG

KPMG itself is working towards becoming a zero-waste business, eliminating all avoidable waste from its operations, by 2030.

This follows a single-use plastic commitment introduced in 2019 that focuses on reducing consumption of single-use plastics and integrating circular thinking into everything KPMG does.

KPMG’s impact

Responsible tax

The ‘Taxation and the Circular Economy: What it means for business’ paper is part of KPMG’s Global Responsible Tax Project, a bid from the company to support tax transparency.

“With social purpose at the forefront of most businesses today, organisations need to respond to the call for tax transparency in a way that aligns to their corporate values,” says David Linke, Global Head of Tax & Legal Services. “This is imperative to enhancing and retaining public trust.”

The project covers five key areas: 

  • Societal impacts of tax 
  • Digital taxation
  • Corporation tax 
  • Environmental taxation
  • Governance and tax transparency

As regulation, governance and tax becomes increasingly important in achieving sustainability goals, KPMG is working to support companies in understanding – and succeeding.

Hear from Chris Morgan, KPMG’s Global Leader for the KPMG Responsible Tax Program

Chris Morgan became Head of Tax Policy for KPMG UK in 2011. In this role he was a regular commentator in the press, as well as on radio and TV, leading discussions on various representations with HMRC/HMT, and in 2014 he spearheaded KPMG UK’s Responsible Tax for the Common Good initiative.

Chris’ background is in international tax in which he has over 25 years experience. He also led KPMG’s EU Tax Group, during which he has taken cases to the UK tribunals and courts and the Court of Justice of the European Union. He also oversaw litigation in many EU countries, in particular for pension funds and investment funds.

Chris is a member of the UN Tax Sub-Committee on Environmental Taxes and CBI International Tax Sub-committee. He sat on the CBI Tax Forces which produced the 2008 report “UK business tax: A compelling case for change” and the 2013 report “Tax in a global economy, The why forward.”

Currently, Chris is the Global Leader for the KPMG Responsible Tax Program which brings all stakeholders into a constructive debate about how to make tax systems work for all.

Chris Morgan, Global Leader for the KPMG Responsible Tax Program

He shares his thoughts on circularity and KPMG’s Global Responsible Tax Project.

Why is the circular economy as a concept so important for businesses currently?

“Two reasons immediately come to mind:

  1. Many businesses are talking about the circular economy as part of their ESG strategies and
  2. There appears to be a growing number of regulations across countries that are mandating it or encouraging it,” Chris says.

Why is this circular economy top of mind for many businesses?

“Now more than ever businesses are considering how they can become greener and the circular economy fits neatly in with business strategy as it has touch points across an entire business.”

There seem to be early adopters and those that seem to naturally apply circular economy principles. Is it easier for certain groups to apply CE principles?

“It is worth noting that some countries where people have low incomes may be more naturally aligned to circular processes as the waste cycle doesn’t work,” Chris explains. 

“Oftentimes they are trying to repair goods and extend the lifespan of goods for economic and/or cultural reasons  rather than for green and/or ecological reasons.”

Do you see a time where there will be universal agreement re its adoption?

“There are early adopters such as the UK, and those that are naturally aligned with the principles of CE. I think the world will slowly catch up.”


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