Building fair taxation: tax shift for circular construction

Within the construction sector, we see various societal challenges intersecting: delivering affordable housing, creating employment opportunities, and achieving our sustainability objectives. At the same time, we observe that the current tax system is not designed to support all of these goals simultaneously.

High labor taxes and the limited extent of environmental levies in the current tax system are often cited as a barrier to scaling up toward a fully circular construction economy. This results in an uneven playing field in which circular construction struggles to compete (economically) with conventional building methods. With this second study on the impact of a tax shift in construction, we have taken the next step in understanding tax shifts from the perspective of (construction) entrepreneurs.

In this research, we examined the added value and additional costs of circular construction across four pavilions at the Floriade 2022 (the Natural Pavilion, Circuloco, The Voice of Urban Nature, The Growing Pavilion, and UAE Salt Water Cities).

We also explored the extent to which a (hypothetical) tax shift could help mitigate the additional costs associated with circular construction. This provides insight into the major housing‑construction challenge the Netherlands faces, with a concrete link to policy.

Several interesting insights have emerged:

• Over 80% environmental gains were achieved through circular construction, based on environmental cost savings;
• A 76% reduction in primary abiotic material use was realised in the Floriade pavilions;
• Circular construction leads to greater job satisfaction and pride, partly because working with reused materials requires more craftsmanship;
• Circular construction is relatively expensive, and the additional costs are largely attributable to increased labor requirements;
• A tax shift helps make circular construction more economically attractive. A hypothetical shift in taxes from labor to environmental and material levies improves the competitive position of circular building.

This research was made possible by the Goldschmeding Foundation and conducted in collaboration with Arcadis, Price, Superuse, Het Groene Brein, and The Ex’tax Project. Special thanks to Overtreders W, Fiction Factory, atelier Dutch, Van Wijnen, K. Dekker, and Biobased Creations for contributing their cases.

More information

• You can find the earlier publication on which this research is based here: Tax shift for circular construction
• More information about the tax shift can be found on the Ex’tax website: Turning tax into a force for good | The Ex’tax Project.

*Please note that this publication is only available in Dutch.