Developing the first regional tax system addressing the SDGs

Green economists are helping the Biscay regional government in its ambition to develop the world’s first Sustainable Development Goals-oriented regional tax system.

The provincial government of Biscay is seeking to design an innovative regional fiscal policy, which encourages an economic and social landscape that prioritises public value and innovation, and addresses the UN’s Sustainable Development Goals (SDGs). 

Biscay is a province in the north of Spain, but also refers to a historical territory of the Basque Country.  

A team from the UCL Institute for Innovation & Public Prosperity (IIPP) is working with the Biscay Governor’s team, based in Bilbao, Spain, on the BEAR project  – so named because several relevant words in the Basque language begin with ‘ber’: berdea, meaning green; berrikuntza, meaning innovation; and berezia, meaning unique. 

The team is undertaking technical research and collaborative work with local companies and institutions to develop a new framework for the provincial economy and taxation system. “We’re aiming to transform the direction of economic activity in the region towards sustainable, inclusive growth, and in doing so address all the Sustainable Development Goals,” explains Martha McPherson, IIPP’s Head of Green Economy and Sustainable Growth. 

The BEAR project draws on several strands of IIPP’s ground-breaking thought leadership and research, which is considering how the role of the state and capitalism can be rethought and how institutions might be transformed accordingly.  For example, for companies in the region that are undertaking specific work to decrease their use of resources, reduce pollution, or narrow the gender pay gap, receive tax benefits and certified recognition of their activities. 

“To get to a green transition, we need to rethink the role of government as a market-shaping actor, not purely concerned with identifying and fixing market-failures, but with setting ambitious directions for economic activity,” argues Martha. 

“We should be harnessing the full range of government instruments - from taxation and procurement, to guaranteed loans, grants and prize schemes – to mobilise private sector actors to also make bottom-up investments in innovation across the entire economy.” 

The BEAR project is aiming to create a replicable approach to SDG-oriented taxation and considering the public value of economic growth at a local level, which other regional and local governments could adopt.