push for cleaner environment in taxing times  
30 September 2008

Worldwide, governments are introducing “green taxes” that are aimed at a cleaner and healthier environment and which, according to some, may even make for better foreign policy. Many European countries have used green taxes, imposing taxes on emissions of common air pollutants such as sulphur dioxide and nitrogen oxides. Compared with other countries in Europe, the Netherlands has a greener tax system, with the aim of discouraging activities that pollute or otherwise damage the environment.

Finance Minister Anthony Zom of the Netherlands says the implementation of a green tax was not an easy task for the government. Policy makers would encounter many difficulties along the way, Zom says.  Zom was speaking yesterday at the Inter-American Centre of Tax Administration Technical Conference hosted by SARS.

The legislature had to take into account the views of stakeholders, the effects of the proposed law on the distribution of income, and whether the legislation would be in alignment with European Union law and World Trade Organisation agreements.  Zom says there has to be support for the proposed legislation from companies, local government and the general public.

Green taxes include environmental taxes (taxes on groundwater, tap water, waste materials, fuels and the regulatory energy tax), and excise duty on fuel and oils. The Netherlands has a three-tiered tax system, which includes traditional taxes, taxes on motor vehicles, and environmental taxes (seven types). Zom says governments should introduce green taxes in incremental steps. The Dutch government recently came under fire from stakeholders for the introduction of a tax on passenger flights. The tax took effect on July 1.

Zom says that a government decision was taken that additional revenue was needed. After consultation with stakeholders, including the airlines, he says it was not possible to introduce an excise duty on kerosene due to international treaties. Ralph Hoffmann, head of division of the federal ministry of finance in Berlin, says the German ecological tax reform was introduced in 1999, and its provisions were partly modified in 2003. The reform consists of an incremental increase in taxes on fuel and in the creation of an energy tax. The goals for the government were to protect the environment and to create jobs as it introduced the tax reform.

In 2004, a study was carried out by the German Institute of Research on the effects of the tax reform. The study shows that there was a decline in the use of energy as consumers became significantly more aware of the use of energy. Companies that managed to make good use of the special regulations relating to the environment also profited. To this group belonged companies that produced environmentally friendly products, which were taxed at reduced rates.

The German government also wants to “radically" reform the motor vehicle tax in Germany by introducing a levy system based not on the size of the vehicle but on the amount of carbon dioxide and other dangerous emissions it produces.  Finance Minister Trevor Manuel recently proposed that a carbon tax be introduced in the near future. The cabinet has announced measures for the introduction of a carbon tax. The model, still not finalised, sets a level of a carbon tax of R100 a ton on carbon dioxide equivalent, rising to R250 a ton by 2020.  Manuel says the treasury is looking at a range of environmental tax measures such as tradable permits, including incentives for cleaner production technologies.

Sanchia Temkin, www.businessday.co.za