“Environment taxes are no more than devious attempts to increase tax revenues whilst making governments feel good about themselves” 1.
0 Environmental Tax The world today is suffering with environmental issues, but it is impossible for individuals to make a different by them selves, thus bringing environmental tax into the picture. Environmental taxation What is it? “People often think of taxation and the environment as two entirely different worlds” (Smith, n. d. ). Milne argues that the government can and do use tax policies to achieve environment goals thus bringing the two together.It has been said that Environment Tax can be defined as a tax whose base is a physical unit that has a proven negative impact on the environment.
(Robert, n. d. ). It is further argued by Ribeiro, that environment taxes are particularly effective instruments for the internalization of the externalities, by incorporating the cost of environmental damages and repairs onto the goods and services. However some of these taxes are interlinked and in some cases taxes are set based on economic values of the damages done.Common or current examples of environment tax would be taxes such as “Fossil fuel tax” which is widely practiced is the US, this tax is paid every time fuel is manufactured or bought, these taxes are imposed for a variety of reasons, but often justified for environmental reasons, various industrialized countries, particularly the OECD members, have imposed or proposed carbon taxes on various types fossil fuels. These carbon taxes are domestic taxes and are not tariffs.The rate of tax can vary according to the amount of carbon residuals that are contained.
“Landfill tax” (paid every time rubbish is throne/dumped on the land). This was first introduced on October 1998, in UK. This was to encourage consumers and companies to produce less or no waste and recover value from waste product, For example recycling and reuse (Whittall,n. d.
). Landfill tax was initially based on estimates of the environmental damage costs; however the tax itself has been raised to seek compliance with the European Union Landfill Directives.And finally, “Aggregates Tax” which exists in the UK, is a tax on tonnes of aggregates rather than on the externalities itself. The choice of a tax per tonne of material proves the need for administrative simplicity. Aggregate taxes are normally targeted taxes and are basically on quarry operation to help save the earths biodiversity. But such taxes are potentially inefficient in situations where the demand for the taxed product is inelastic, which mean that the tax will raise revenue but do little to reduce the tonnage of material used.
If there is no effect on the tonnage then there will also be no effect on the externalities and therefore the environmental purpose of tax is lost. This is because, only by taxing the externalities directly e. g. noise, dust, visual intrusion, road vehicle emissions, is there an incentive for the industry to remove the tonnage from their environmental effects (EFTEC, 1999).
These taxes can be divided into two categories (1) Broad Based Tax and (2) Target Tax. Broad based taxes have an impact on everyone or a lot of people (e.g. fossil fuel tax) and the later impacts targeted areas only (e. g. land fill tax). As to whether it pays to be an environment saint, Professor Steve Toms agrees, referring to a case where Milton Friedman once famously pointed one way to make a positive contribution to the share holders is by social and environmental responsibilities. Furthermore environment tax raises the country’s revenue, thus helping the government.
2. 0 The Governments Role in Environmental Tax”Over time, the Government will aim to reform the tax system in ways that will deliver a more dynamic economy and a cleaner environment: shifting taxes from ‘goods’ like employment, towards ‘bads’ such as pollution” (DETR, 1999 cited in Brian and David, 2000). The government has to raise funds in order to control destructives activities and protect the environment. So being the case, government implemented environment tax, for taxes can discourage things and at the same time they tend to make something public (Anon 2, March 2004)Therefore government will increase and decrease environmental taxes in order to control situations. However, there have been arguments implying that the government is doing nothing more than changing the tax base, whilst making themselves ‘feel good’ It is hard to define ‘feel good’ for it is very subjective. It could either mean, they feel good about what has been done for the country or what they have achieved as an individual. Nevertheless environmental tax itself is a very subjective issue for it is hard to audit environmental damages or for that matter account for pollutions, thus making it difficult to draw the line.
As this essay unfolds, it would be considering if environmental tax is used by the government as a devious attempt to increase tax revenue. 3. 0 Is Environmental Tax a Devious Attempt to Increase Tax Revenues ?Two very strong bodies who are against governments with environmental taxes are the companies/enterprises and the Green party. Companies have become very anxious about the likely damage to business arising from the Kyoto environmental protection measures (Robert, n. d. ) for environmental taxes would be eating up their profits. This was revealed in a survey conducted amongst Financial Directors and Controllers by CIMA.
Companies being an easy target for the government feel that the corporate tax should cover all these issues. It is further argued that the environmental tax is on the product rather than the emission. For example, “impending aggregate tax (which is taxes on quarry operations) is a tax on tones of aggregates rather than on the externalities directly.The choice of a tax per tone of material reflects the need for administrative simplicity, as with the landfill tax” (Brian and David, 2000) Moreover this tax is expected to affect 50% of the business, for by taxing the companies the government would be indirectly making it harder for international companies/MNCs to operate in the country hence the business is affected, resulting on a damage of the country’s economy.
Where after environmental tax will also be driving away foreign investors from operating their business and will inevitably cause pressure on parties involved.