The concept of the circular economy is becoming increasingly prevalent in discussions around supply chains, sustainability and geopolitical challenges. As the circular economy agenda seeks to reduce waste and reduce raw materials inputs in all stages of the system, businesses will have to holistically manage all parts of their production and supply chain.

More broadly, business tax leaders are asking how the circular economy might fit with potential taxation developments. What has occurred to date and what might we see ‘around the corner’? What potential tax levers are out there? What impacts might they have on our business?

Download PDF

Taxation and the Circular Economy: What it means for Business

This paper seeks to explain what is generally meant by the circular economy, considering what taxes, tariffs, and incentive levers are being used or proposed to drive a more circular economy.



Download PDF (636 KB) ⤓



What is the circular economy?

Proponents of the circular economy argue that the traditional economic system of production is a linear economic model. This model operates under the principles of ‘Take, Make, and Waste’ and does not have sufficient regard for the limitation of the globe’s resources.

A circular economy approach is said to involve the following three key principles:

  1. Design out waste and pollution
  2. Keep products and materials in use
  3. Regenerate natural systems

Key insights

Tax & the Circular Economy

Businesses should be aware of the different levers that have been used by governments to support and speed-up the transition to a circular economy. Of relevance are taxes, tariffs, and reliefs/ subsidies.


Tax and subsidies at the use stage

Globally, interoperability is a big problem in healthcare. At the 2023 Oracle Health Conference, an announcement was made that Oracle was going to be open and connected — even for health systems or providers who have made investments into other EHR systems. What guidance are you giving your clients about their strategies for working with Oracle in the future, specifically when they already have a different EHR?


Tax at the end-of-life stage

Tax on raw materials only impact external costs from extraction or production processes but not from waste disposal. There may be both downstream and upstream impacts that need to be considered, and taxes have been introduced at end-of-life stage of products to address this.


Tax at the production stage

From an implementation perspective there are several issues to consider such as:
i) Increasing costs, particularly in the short-term as alternative raw materials sources/technology might not be available;
ii) the impact of cross material substitution effects and
iii) potential impact on trade and industries from a broader perspective.


How KPMG professionals can assist in this process

There are four key areas where KPMG professionals can assist businesses in embracing the circular economy. These are:

  • ESG specialists who can identify government initiatives that impact the circular economy including determination of the carbon footprint for an organization
  • Supply chain specialists who can consider the role of supply chain both for specific businesses and as a broader component of supply chain
  • R&D and grant specialists who have experience with grants and concessions globally
  • Tax specialists who can assist when considering environmental taxes and tax aspects of the circular economy

Connect with us