Environmental Policy

II. Basic Issues Pertaining to Environmental Taxes and Charges - B. :Utilization of Economic Instruments in Environmental Policies - Taxes and Charges

II. Basic Issues Pertaining to Environmental Taxes and Charges

B. The Relationship Between New Tax and Existing Tax

In order to develop environmental taxes and surcharges, it is possible, along with implementation of new taxes, to consider reviewing the existing taxes from the standpoint of environmental protection. For example, in order to curb the use of fossil fuels, it is possible to consider taxation from the perspective of environment protection and easing taxes on energies that are of less burden to the environment.

There are two basic trends in the use of environmental taxes in OECD countries. One is a move to completely revise the tax system, evident in countries such as Denmark, the Netherlands, Finland, Norway, and Sweden. The group revised the energy tax system and is shifting from income taxes to consumption taxes that incorporate environmental taxes. The other group, consisting of Austria, Germany, Belgium, France, and Switzerland, only applies the environmental tax on a small scale, emphasizing the impact on incentives by increasing the use of environmental taxes on a narrower framework within the general tax revision.

If our country were to implement taxation based on the CO2 content, we would need to evaluate it in relation to other energy taxes. Information provided by the OECD (OECD, 1996a) based on IEA data shows there is a wide difference between the final price of gasoline, and other products, and the respective tax burden of these products, and our country's standard is considered lower than other nations. (Table 5).

Furthermore, on one hand, our country's oil-related taxes such as oil taxes and gasoline taxes are aimed at environmental preservation. However, on the other hand, the revenue is designated to be used for energy policies and road construction, indicating the basic purpose of the tax to be of a different nature. Our interviews show opinions that the "existing tax system on energy has an important role as a financial source for road maintenance, but from the point of view of environmental policy, it serves as a disincentive and should be restrained in the future."

From the perspective of administrative costs, implementation of a new tax is generally costly, and tax costs under the current administration are much less. Therefore, it can be said that revising the current tax system is more advantageous from the standpoint of cost. For example, in Sweden, the National Tax Board imposes a CO2 tax, but it is incorporated into the existing petroleum tax, energy tax, and environment tax on domestic air traffic, and the administrative cost for collecting the CO2 tax is estimated to be 3 million Swedish krone (approx. 48 million yen) per year. This administrative cost for the CO2 tax is considered cheaper than other indirect taxes and considered extremely low compared to that of income tax (The Swedish Experience -- Taxes and Charges in Environmental Policy, Ministry of the Environment and Natural Resources).


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