In spend based analysis, should we include the value of taxes paid to local or national governments?

Greenhouse Gas Protocol
1

Hi All,

Summary: In spend based analysis, should we include the value of taxes paid to local or national governments?

Detail:

I’m working on a spend-based analysis for a company that manufactures physical products. Setting aside the debate on the value of such an analysis, I have a complete list of the company’s general ledger accounting codes which I’m allocating to UK Gov SIC codes and associated emissions factors. There are some accounting codes which are recording payment of taxes such as corporation tax, VAT, etc. I could allocate these to SIC 84 (Public administration and defence services; compulsory social security services) but I’m not sure which Scope 3 category to report the emissions under, if at all.

The GHG Protocol doesn’t seem to mention taxes at all so maybe it should be excluded in that the emissions derived form the activity giving rise to the need for taxes should already be accounted for elsewhere (e.g. the purchase of materials, use of energy, etc).

Any thoughts, very welcome!)

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Depends of the methodology of the emission factors. For UK DEFRA I think the taxes are excluded but you need to check on the methodology

2 Likes
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I tend to agree with Carla. In general those spend-based emission factors are looking at macro-economic input-output models and those always exclude VAT.

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Thanks @carlatsantos. Just to clarify what I mean (I am using UK data for this analysis by the way). I’m not referring to whether or not the value of a given transaction should include taxes such as VAT (I agree with you, I think that should be excluded), but rather whether the line in the ledger that is where the company have paid corporation tax to the Government (for example) should be included in the analysis. I can see an argument for it being allocated to SIC 84 (“Public administration and defence services; compulsory social security services”) but I can also see that the activity that has given rise to the need to pay tax has already been captured in teh procurement of goods and services so my gut feeling is to exclude these as purely financial transactions with limited physical impact (I’m choosing to ignore the energy associated with data transfer etc as well within the margin of error of this sort of analysis). Vey interested to get your thoughts.

Thanks

Kev

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Thanks for replying. I’ve added a clarification in my response to Carla’s note. Would be great to get your thoughts on that.