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

II. Basic Issues Pertaining to Environmental Taxes and Charges

C. Concrete Designing for Taxation

When it comes to the actual taxation, it is necessary to choose a timing that is effective in preserving the environment and at the same time least costly in terms of collecting the revenue. For example, there are many who emit CO2, and its emission is directly related to the consumption of fossil fuel. Therefore, when considering the necessity to minimize taxation costs and maximize the base of taxation, it is desirable to tax fossil fuels at the point of production and import.

Upon evaluation of Scandinavian countries regarding CO2 taxes, the Netherlands imposes a CO2 tax at the point of production or import, in other words after refinement. In Norway, the CO2 tax is imposed at the point of distribution like other indirect taxes and commodity taxes, in other words, when the producer or the importer sells the taxable items to the retailers.

On the criteria of taxation, it is important to select a level that internalizes the environmental cost and causes the economic entity to change, or at least serves as an incentive to change the current economic activity. However, several points need to be considered when establishing the actual levels.

A relatively low taxation rate can be effective if the environmental taxes and charges on products and services that inflict burden on the environment enable the economic entity to realize the environmental cost and can largely change its actions. Considering that the consumption activity and raw material usage in the market change according to the overall burden caused by the various taxes, including environmental taxes and charges, then it becomes necessary to realize an actual increase in burden. Furthermore, in efforts to promote activity to remove the burden from the environment through environmental taxes and charges, as well as effectively combine them with other policy measures to restrain pollution, it should be possible to achieve the goals of environmental policies at much lower taxation levels than just levying taxes and surcharges to achieve the goal.

Regarding the subject of taxation, it is not necessary to change the subject of taxation according to different localities. Therefore, it is desirable that government takes the initiative in taxing, and work to come up with a system that seeks to collaborate with other nations. In resolving domestic environmental issues, one can consider a number of effective means of taxation including economic measures based on individual issues faced by the locality.