The Eighth Annual Global Conference on Environmental Taxation
 
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IMPACTS OF ENVIRONMENTAL FISCAL REFORMS AND OTHER MARKET-BASED INSTRUMENTS 
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Workshop 5: Analyses of the effectiveness of environmental fiscal reform

The Evaluation of the Effectiveness of
Environmental Tax Expenditures in the Netherlands

Mark Arts, Ministry of Finance, Netherlands

In the Netherlands several fiscal instruments promote sustainable development. Except for taxes to discourage specific behavior (like taxes on the use of energy, ground water and tap water), tax expenditures are used to encourage investments that are environmental-friendly, reduce the consumption of energy or promote the production of energy from renewable resources.
The design of these kinds of tax expenditures is important in relation to what they try to achieve. To stimulate the adoption of innovative investments (compared to common capital assets), the fiscal instruments should cope with technological progress, be dynamic and provide a temporary incentive.
The most important tax expenditures for entrepreneurs are investment allowances in the area of energy (EIA) and pollution prevention (MIA), and the accelerated depreciation for specific environmental investments (VAMIL). Furthermore, a tax incentive is applied that stimulates private investors to invest their savings in green funds (Groen Beleggen).
In table 1 the budgetary impact of these incentives for 2007 is shown.

arts_mark

Recently, these fiscal instruments have been evaluated. Several conclusions can be drawn from these evaluations. The lessons learned are related to the impact of the instruments and to the process of evaluation.

With regard to the process of evaluating environmental tax expenditures, the evaluations show the difficulty in proving the effectiveness of a fiscal instrument:

  • Goals of instruments are often not clearly formulated. No specific indicators are formulated to measure success.
  • The instruments are used for different goals simultaneously for instance the stimulation of environmental-friendly investments and compensation schemes.
  • The poor quality of available data for analytical purposes.
  • Analytical problems due to the lack of counterfactuals (situation with and without policy measures).

Nonetheless these difficulties, the different instruments appear to be effective and efficient in the introduction of innovative investments, which are environmental-friendly and reduce the consumption of energy. Furthermore, the implementation of these instruments seems efficient.
(PM specific conclusions can be drawn in the coming weeks, when the evaluation reports will become definitive.)

 

Spanish Environmental Fiscal Reform

Dr. Maria Luisa Fernández de Soto Blass, University CEU San Pablo, Spain

The research compiles the trends in environmental taxes in Spain. It makes an introduction of the Green Taxes in Spain and a summary of the environmental tax elements such as legal base, beneficiary, tax payable, basis of assessment, exemptions, deductions, collection, rate of Personal Income Tax, Corporation Tax, Wealth Tax, Value-Added-Tax, Tax on Economic Activities, Excise Duties on Hydrocarbons, Tax on Electricity, Local Taxes and other taxes.
The author studies the environmental information processing at Spanish Fiscal Systems and she offers new taxes, beneficiaries, exemptions and deductions in the line of the Spanish Fiscal Reform.
This paper is the result of three researches that the author carries out at The Institute for Fiscal Studies, Ministry of Economy and Finance, Spain, CEU University of San Pablo, Madrid, Spain, and at University of Leeds, United Kingdom, from 2003 to 2007.
The article describes the Spanish State Environmental Taxes, indicates the legislation applicable and analyses the reform of the Spanish environmental fiscal legislation of this taxes actually.
For example, the Net Incomes are calculated very difficult for Forest Development at the Spanish Income Tax. Negative Taxable Base and Operating cost are produced in more years than the law permits as deductible. There are fiscal incentives for Expenses for use own or Public Service Vehicle for The Personal Income Tax and Corporation Tax.
The Personal Income Tax created the deduction for gifts provided for in Law No 49/2002, fiscal system of Non-Profit Making Organizations and tax incentives for Patronage.
There are a deduction for investments in tangible assets intended for environmental improvement and pollution control and deduction for investments made by SME in new tangible assets addressed to the use of renewable energy sources.
The Corporation Tax introduces some special provisions for depreciation of protection assets: Mines and Lands but this rules are fragmentary and insufficient.
Certain expenses for environmental improvement may be deducted. There are free recoup for some environmental investments and special periods for compensating Tax. Negative Taxable Base.
The Corporation Tax has deductions for business activities as deductions for research and development work, fostering technological innovation activities, for fostering the use of the new ict in the sme, for staff training cost, investments in global navigation and monitoring satellite applied to vehicles, investments for environmental improvement and pollution control and for new open-ended employment contract with a disabled worker 
The Spanish Fiscal System created a deduction for investments in tangible assets intended for environmental improvement and pollution control and deduction for investments made by SME in new tangible assets addressed to the use of renewable energy sources.
Value-Added-Tax has environmental provisions. The value of recyclable packaging is included in the taxable base in order to stimulate the purchaser to give the packaging back.
There are some exemptions about delivery of, scrap iron, cardboard and glass.
The value Added Tax has created a reduced rate of 7 %, applicable to certain goods, collecting of waste, cleaning of  sewer system.
There are special processing for returnable container and packing to calculate the taxable base.
Excise Duties on Hydrocarbons contemplates reduced rates for leadfree petrol and also for liquefied oil gas used for public transportation. There are also tax incentives for controlled incineration of waste oil, returns of polluted products to their factory, and production of bio fuels in projects for development of less polluting products.
There are some exemptions about oils used and reduced rates applicable to petrol, gas oil kerosene and fuel oils.
The Wealth Tax and the Real Estate Tax declare exemptions about Forest Development Property and Spanish Forest Heritage Property.
The Wealth Tax has no special rules to evaluate real estate in protected natural spaces.
The Tax on Mechanically Powered Vehicles establishes a relief of 50% of the full tax if the vehicle consumes petrol which produces less pollution and if it uses a different categories of mechanically powered vehicles.

 

On the Road to a Sustainable Transport Sector in South Africa:
The Role of MBIs 

Alexander Ross Paterson, Faculty of Law, University of Cape Town, South Africa

The past ten years have seen a significant shift in South Africa’s environmental and tax policy. Incentives are now regarded as an essential component of the countries environmental regulatory framework. Tax is no longer viewed as purely an income generating instrument, but also as a tool for moulding human behaviour, encouraging more efficient resource use and improving environmental outcomes. The above is particularly evident in the Government’s recent increased use of market-based instruments to support and reward sustainable development initiatives in South Africa, such as those aimed at reducing the environmental externalities caused by the road transport sector.

South Africa has approximately 6.5 million vehicles travelling its ever extending road network. All indications are that these numbers will rapidly increase owing to the countries poor public transport infrastructure and the population’s material aspirations. This fleet is generally aging, in poor condition, devoid of emission control technology and reliant on high octane fuels. Vehicle emissions are accordingly on the increase and contribute significantly to the countries air pollution crises. From a waste management perspective, vehicle carcasses and accessories increasingly litter South Africa’s landscapes.

In light of the above realties, the Government is currently reforming the countries outdated air pollution and waste management regimes. The new legal regimes will introduce many regulatory tools of key relevance to the road transport sector including: ambient air quality standards; emission standards; clean fuel specifications; emission reduction technology; and differential waste management and disposal schemes. Provision is made for authorities to develop incentives and disincentives to facilitate the implementation of these tools.

This law reform process has been dovetailed with various other current government policy initiatives specifically aimed at developing an array of market-based instruments to facilitate the implementation of the above tools. Options which have been implemented or are currently being considered include the following:

  • fuel levies to discourage the use of private vehicle, encourage the use of public transport and reward the development and/or use of fuel efficient technologies, clean emission technologies and cleaner transport fuels (such as biofuels);
  • vehicle customs and excise duties to suppress vehicle demand and reward the purchase of vehicles using fuel efficient and clean emission technologies;
  • licensing tariffs and levies to reflect environmental externalities of various vehicle models;
  • income tax deductions to encourage investments in clean fuel and emission technologies;
  • agricultural subsidies and tariffs to facilitate the growth of the bio-fuels industry; and
  • product taxes, deposit refund systems, disposal taxes and differential waste service tariffs to encourage sustainable management and disposal of waste associated with the transport sector.

This paper aims to critically examine the array of market-based instruments provided for in South Africa’s recently reformed law and policy frameworks of relevance to the road transport sector. Which market-based instruments have proven successful? Which have not and why so? What are the challenges facing the extended implementation of these instruments in a developing economy such as South Africa? Will they ultimately facilitate the development of a sustainable transport sector or not?

 

Environmental Taxation on Fuel and Vehicles. The case of Brazil 

Prof. Jose Marcos Domingues, Rio de Janeiro State University, Brazil

After briefly presenting the basic concepts, constitutional and legal provisions concerning environmental protection in Brazil as well as revisiting the polluter-pays principle in connection with the characteristics and merits of taxation as an adequate instrument for the fulfillment of that fundamental goal (the protection of the environment), the paper will focus on Brazilian taxation on fuels and on motor vehicles (trucks, buses, motorcycles and automobiles) where the greening of taxes has reportedly been quite effective.
 
The article will go through the main features of the Brazilian tax system and the respective principles and limits, specially considering the division of taxing competences in the country’s federation, which justifies the existence of a federal excise tax on industrialized products (IPI), which is imposed on engines and on vehicles, and a state value-added tax on goods and some services (ICMS), which is imposed on fuels, engines and vehicles, besides another state annual property tax on motor vehicles.
Federal and State taxes generally respond to clean-air policies. Tax rates have varied according to the size and horse-power level of engines and vehicles, type of fuel and use of vehicles. So, the paper will introduce the evolution and results of such green-tax policies in Brazil.
Finally, the essay presents the Author’s critical views on the above environmental taxation, the potential of which is much broader than what has been implemented, showing other options that might be brought into the existing scenario in order to better meet sustainable development goals.

 

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