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Danish experiences and recommendations for the implementation of Green Budget reforms and for the use of Green taxes. Søren Dyck-Madsen The Danish Ecological Council. Distribution of the Danish Tax Revenue in 2000 in billion DKK. - PowerPoint PPT Presentation
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Danish experiences and recommendations
for the implementation of Green Budget reforms
and for the use of Green taxes
Søren Dyck-Madsen
The Danish Ecological Council
Distribution of the Danish Tax Revenue in 2000 in billion DKK
Income taxes Company taxes
Green taxes VAT
Land tax Others
Revenues from environmentally related taxes in per cent of GDP
Danish Green Taxes in % af GDP
0
1
2
3
4
5
6
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
20
00
20
02
20
04
% o
f G
DP
Some examples of Danish Green taxes
Tax on Organic Chlorinated Solvents Tax on Growth Promoters (Antibiotics) accompanied
by a voluntary agreement with Agriculture Danish Energy Taxes Danish Transport Taxes
Annual Consumption of Taxed Organic Solvents
0
200
400
600
800
1000
1200
1400
1992 1993 1994 1995 1996 1997 1998
Tonnes per year
Dichlormethan Trichlorethylen Tetrachlorethylen
Tax on Growth Promoters / Antibiotics
0
5
10
15
20
25
30
35
40
1997 1998 1999 2000 2001 2002 2003
Mio. DKK
Danish CO2 Emissions
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
1000 tons CO2
Extraction and Raffining Energy production
Transport Production
Trade and Servicesector Households
Energy use in Transport
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
180.000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
TJ
Roadtransport Railways Domestic seatransportAirtransport domestic Airtransport International
Cars per 1000 Inhabitants in 1995
195
211
220
258
270
302
340
351
360
363
366
371
386
411
418
433
445
447
457
463
465
467
495
552
563
563
0 100 200 300 400 500 600
Poland
Greece
Hungary
Portugal
Ireland
Czech rep.
Denmark
Spain
J apan
NL
UK
Finland
Norway
Sweden
Belgium
France
Iceland
Austria
Schwitzerland
New Zealand
Australia
Canada
Germany
Italy
USA
Luxembourg
Number of Danish Vehicles
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000
1.400.000
1.600.000
1.800.000
2.000.00019
80
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Private cars Vehicles 2.000-3.500 kg
Driven Kilometers
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
Mio. driven km
Experiences and Recommendations
Green taxes are very useful targeting environmental problems and recommended by EU-Commission, the OECD and many others
But it is hard to create public understanding and acceptance for green taxes in the public and in industry
Information and Public Acceptance
Environmental tax reforms do have two sides:
Taxes on environmental harmful products, behaviour, land-use and non-renewable resources
Revenue returning from the green taxes to lower taxes on labour, secure the social fair economic distribution, secure industrial competitiveness, subsidising environmental actions like improving energy efficiency and others
It’s good to remember
Prepare the public for the environmental tax by:
Highlight the environmental problems that you want to address very well ahead of the budget negotiations
Maybe make a survey that underlines the environmental problems
Inform the public about the environmental problems in order to get public acceptance of the taxes as an effective instrument to mitigate the problems
Revenues
Some green taxes do create revenues even though the tax itself are meant to reduce the tax base
Other green taxes are meant to be reduced to zero as the tax fulfils it’s own purpose and eliminates the use of the product
How to Spend the Revenues
Earmarking of revenue for environmental purposes
Revenue in the State Budget to finance overall State expenditures. Expenses for environmental purposes are decided in the State Budget
A mixture of the two – which can be very convenient in practical politics
Returning of Revenues should fulfil several goals
Social impacts should be neutral or slightly positive
Industrial effects on competitiveness should be neutral or at least not so heavy that they forces the companies to close down or move abroad
Should be revenue neutral – or a very well targeted way of raising revenue needed instead of increasing other taxes such as income taxes
Green taxes can be introduced without harming industrial competitiveness
1: Finland
2: USA
3: Sweden
4: Denmark
5: Taiwan
Ranking of world growth competitiveness according to a 2003 report by the World Economics Forum
6: Singapore
7: Switzerland
8: Iceland
9: Norway
10: Australia
Revenues can stabilise green politics
Revenues are not the normal goal for green tax reforms
But do consider creating revenues anyway since revenues tend to be rather stable while governments change
But argue always with the benefits for the environment, for the national economy and for the employment
Recommendations for the returning of revenues from the PETRAS project
Appoint an independent body to ensure that revenues from green taxation are used as promised if huge mistrust in governments exists.
Highlight the tax reduction on people’s payroll slips. Give a lump sum – maybe as a yearly green check –
to everybody. Introduce a free basic consumption for households –
taxing overuse additionally hard. Do take care in terminology
A real Danish tax shift
Public acceptance is the key problem for an Environmental Fiscal Reform –
Summary:
Inform about the environmental problems the EFR is going to target
Make the use/returning of the revenue very clear Neutralise regressive effects in income distribution Neutralise effects on industrial competitiveness Consider to use parts of the revenue for additional
environmental purposes in order to ”give people something for the money” - But do remember that revenues from green taxes can be used for hospitals too
Broad political coalitions in order to avoid misuse of green taxes
Because of the difficulties for the public to understand the construction of a green tax reform it is advisable to seek a broad coalition behind the green taxes in order to make the reform more stable and predictable for both households and especially for industry.
A broad coalition also minimises the risk that one or
more parties do misuse the visible parts of the green tax reform against the present government in an election campaign – as we saw in the latest Danish elections.
Lowering of VAT on certain products and sectors
Lowering of VAT for certain sectors can be part of an overall green budget reform, but must be considered very carefully.
Differentiation in VAT is for sectors. This makes it an expensive instrument for environmental purposes, but a good instrument for unemployment reasons.
Remember that revenues lost by reducing VAT will lead to the increasing of other taxes.
Therefore it often is better to think in subsidies, that can be applied much more precise for environmental reasons, and because of that are much “cheaper” for the State Budget.
Coordination of energy and carbon taxes with emissions trading system
The introduction of a EU wide internal emissions trading system will require a review and maybe reconstruction of some green taxes on energy, fossil fuels and carbon.
The connection between the two kinds of regulatory instruments for environmental purposes is not clear
More elaboration is needed – but for sure most e.g. most energy taxation – like taxes on household use of electricity can stay unchanged if desired.