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European Commission reviews green tax options

06 March 2014   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas (Tax-News) 

Increasing taxes on the causes of air and water pollution in the European Union could generate revenues of EUR35bn (USD47.2bn) in real terms in 2016 alone, the European Commission has claimed in a new report.

A new study from the Commission on the potential for greener taxes, which pools data from 12 member states, considers a move away from levies on labor, toward those on pollution. Revenues could hit EUR101bn in 2025, with the Commission predicting far higher figures were steps also taken to remove environmentally harmful subsidies.

Of the 11 member states included in the study, the potential revenues that could be generated range from just over 1 percent of gross domestic product (GDP) to 2.5 percent of GDP, depending on the nation.

The suggested taxes should have relatively low administrative costs, compared with other levies, the report adds.

It recommends that where possible "member states should make use of the existing administrative apparatus to collect revenues, so as [to] minimize administrative costs. This might include making use of existing reporting or monitoring obligations. It might be considered also that where these do not exist, the fact that taxes can help to drive the provision, and capture of, data has some value in itself beyond that of the revenue generated by the tax."

On balance, changes of this nature are expected to have a positive impact on employment, especially where environmental taxes effectively replace taxes on employment.

The study will feed into the European Semester, a mechanism established in 2010 to improve the coordination of economic policies in EU countries. The Commission has made clear that it intends to "green" the Semester, with the aim of ensuring that macroeconomic policies are sustainable from an environmental, as well as economic and social point of view.

The EU's Environment Commissioner Janez Potocnik said: "Environmental fiscal reforms have the potential to almost double the revenues they currently bring to national treasuries, with benefits for our environment as well as scope for cutting taxes on employment or cutting deficit. That's a powerful argument for changing the status quo."

This article first appeared on tax-news.com.


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