WILL GREEN TAXES BE INTRODUCED IN THE NEAR FUTURE
Will Green Taxes be introduced in the near future
By Claire Tucker
Surprisingly, the National Treasury’s recent discussion document on “Market-based Instruments to Support Environmental Fiscal Reform In South Africa” has not been widely discussed following its release in April this year.
The Treasury paper explores the sort of green taxes and charges that could or should be introduced into the South Africa economy. As all business people know the best way to change behaviour is by introducing a financial incentive to sweeten the change. Such measures would obviously favour those businesses that are have already implemented environmental management policies to monitor and control their emissions, consumption and waste as they would be able to gain a competitive advantage over their less environmentally conscious competitors.
Many of the taxes discussed in the Treasury paper have been discussed time and again in South Africa, these include: higher vehicle and fuel costs to discourage unnecessary purchase and use; product taxes to decrease waste generation; disposal and deposit systems also to encourage the decrease in solid waste generation. What makes the paper interesting is the fact that the Tax Policy Unit of Treasury itself is considering the measures and is now engaging in debate with the public about the pros and cons of such measures.
Those in favour of such measures argue that levying a “green tax” on environmentally harmful activities, (such as consumption of fossil fuels and the consequent production of greenhouse gasses or using a landfill) encourages companies and individuals to acknowledge the true environmental costs they incur. Many consider such costs necessary because the environment is a common good that in principle is available at no cost to companies and individuals. Without such costs the environment is “consumed” at an excess and unsustainable rate. Green taxes have been introduced in a number of countries to reduce environmentally harmful emissions to air and water, and to reduce the amount of waste generated. In addition, through allowing tax exemptions for cleaner technology or allowing deductions in the determination of taxable income in response to pollution control measures would go a long way towards encouraging the environmental cost of goods to be considered by the manufacturer and consumer alike.
Although the policy is still in its developmental stage a criticism of the paper has been its over consideration taxes which could be imposed and lack of in depth consideration of flexible incentive mechanisms. It does propose the following “positive” measures:
· Environmental funds;
· Partial or soft earmarking of environmentally-related tax revenues;
· Rehabilitation funds / guarantees;
· Accelerated depreciation allowances; and
· Review of specific tax provisions (for example those incentivising ground clearing and agricultural development over conservation of virgin bush).
Obviously there must be a lot of debate about applying such measures in developing economies, such as South Africa, where any increase in the price of inputs such as fuel may lead to a decrease in growth potential in the economy. Commodity based taxes also have a disproportionate effect on small emerging businesses and on the poor. The public reaction to the Plastic Bags Regulations promulgated last year is evidence of this debate.
Scandinavian and Northern European countries, such as the Netherlands and Belgium, are at the forefront of the use of economic incentives and penalties to encourage environmentally beneficial behavior. For example, Norway has historically implemented a system of environmental taxation. Taxes have been introduced to reduce environmentally harmful emissions to air and water, and to reduce the amount of waste generated. The first tax that had an explicit environmental purpose was levied on sulphur in mineral oil in 1971. However, a wide-spread use of environmental taxes was not seen until the late 1980s and early 1990s. Taxes on mineral fertilisers, pesticides and lubricant oil were introduced in 1988, CO2 tax on petrol, auto diesel oil, mineral oil and the off shore petroleum sector in 1991, while the sulphur tax on mineral oil was increased substantially. Since the early 1990s tax instruments have played an important role in providing incentives for cleaner production and consumption patterns, even though regulation has remained the main policy instrument to abate environmental damage.
It is hoped that more extensive public debate on the Treasury paper will facilitate “green fiscal measures” that ensure sustainable development, cut down on our environmental foot print and also ensures proper payment for the environment by those who use it most.