Femke Groothuis: How Taxes Can Save the World

The Ex’tax idea is to shift taxation from labor to natural resources. This idea was conceived in the early ’90s by Eckart Wintzen, founder of Ex’tent. He knew as an entrepreneur that the tax system really gives incentives in the wrong direction. In our society labor costs are very high, which means entrepreneurs will do anything they can to work with as few people as possible even if that means using more natural resources. Natural resources are hardly taxed, or not taxed at all, so there really is no reason not to use them.

Basically, the idea is to shift taxation from labor to natural resources in order to enable a different kind of prosperity to emerge based on using the abundance of human capacities rather than scarce natural resources. It really gives room to apply more the benefits of creativity and manpower and craftsmanship rather than scarce natural resources.

There’s tremendous support in society at the moment because it really connects to a lot of problems we’re in right now. There’s of course the financial crisis, but there’s also the climate crisis, resource crisis, food crisis, and unemployment is rampant in Europe and across the globe. Ex’tax is a way out — a way to update our tax system to be able to face the problems that our societies are having to deal with at the moment.

It’s not a quick fix; it’s a system change. That makes it really interesting, but also difficult. Taxation really has become a force of nature in directing people away from sustainable behavior and social behavior. It requires a big step to update that system, to create a more fair and more sustainable system in which businesses can flourish.

I studied international relations and the environment and did research in Kenya. I realized I wanted to contribute to a shift in consumption patterns in the western world. That’s where I met Eckart, who was already pioneering green and social investment. The business model really appealed to me — investing in the immaterial economy, helping the economy to use fewer resources.

The majority of people think it’s impossible to do. That’s because of the international nature of taxation. Also, a lot of things require international agreement — for example, carbon tax, protecting ecosystem services. So I totally understand people are hesitant to see that it can actually happen. On the other hand, what makes me optimistic is there are these major trends worldwide with respect to resource scarcity — for example, an increase in the urgency of change.

Another one is that people say it will be bad for business, mainly the fossil fuel industry. That’s true: A shift in taxation requires a very big shift in business models and business strategy. At the same time, we already see very big players shifting business models. Royal DSM is a great example. [It] started out as a Dutch mining company, then transformed to life sciences, away from fossil fuels. This transformation is possible, but we need more courageous leaders. Currently there maybe are not enough of these courageous leaders — but I see a growing number of them.

We need first to work out the methodology, then apply the toolbox in other European countries or even outside Europe. The Netherlands is being used as the first example and the first research area.

My main strategy is to continue to communicate about the topic, to get more and more people to understand the value of the idea, and at the same time develop a plan for how it can be implemented. Only governments can shift transition; businesses can’t do that. But governments are very [reluctant] to harm business, so [we need] the business community to request change from governments.

Success would be to touch people with this idea, have them think about the consequences as well to get things rolling, let’s say first of all in Europe. That would be a big thing.

In America the topic of taxation has a different feel to it, but don’t think the systems are that different. In the U.S. a major part of tax income comes from labor. Also, in the U.S. Republican congressmen are interested in this topic. It connects employment with sustainability issues. It solves all different kinds of problems at once. I have good hope it will grow over the next two years.

Usually people don’t like very much to think about the topic of taxes. It’s not a very “sexy” topic. But, really, taxes can change the world. If there’s anything I want to contribute, it’s that people will start thinking in that direction. Taxes have become a force of nature in themselves, directing consumers and businesses away from sustainable behavior and employment, and we can actually change that.