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Danish experiences

Danish experiences

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Danish experiences

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  1. Danish experiences Søren Dyck-Madsen The Danish Ecological Council - DEC

  2. Revenues from environmentally related taxes in per cent of GDP

  3. Distribution of the Danish Tax Revenue in 2000 in billion DKK

  4. Danish Green Taxes in % af GDP

  5. Green taxes can be high without harming industrial competitiveness 1: Finland 2: USA 3: Sweden 4: Denmark 5: Taiwan 6: Singapore 7: Switzerland 8: Iceland 9: Norway 10: Australia Ranking of world growth competitiveness according to a 2003 report by the World Economics Forum

  6. Some examples of Danish Green taxes • Tax on Organic Chlorinated Solvents • Tax on Growth Promoters (Antibiotics) accompanied by a voluntary agreement with Agriculture • Danish Transport Taxes

  7. Annual Consumption of Taxed Organic Solvents The (small) Tax on Organic Solvents was introduced in 1996

  8. Tax on Growth Promoters / Antibiotics

  9. Cars per 1000 Inhabitants in 1995

  10. Number of Danish Vehicles

  11. Driven Kilometers

  12. ”Rules” for anEnvironmental Tax Reform • Should target relevant and important environmental problems and be effective to reduce those problems • Should be distributional neutral – increasing green taxes should be followed by reducing other taxes in a way so that the poorest will not be hit the hardest • Should be revenue neutral – a reform is not created to increase state incomes and might not be accepted by the public if increasing the overall tax burden • Should additionally reduce environmentally harmful subsidies

  13. Environmental problems to be Targeted by Economical Instruments • Green House gases – especially CO2 – but also industrial GHG’s like SF6, HCFC • Overuse of natural ressources • Too much traffic • Too much energy used • Protecting ground water • Use of hazardous Chemicals • Too much waste produced • Avoid urban sprawl

  14. A real Danish tax shift

  15. 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 as part of an environmental tax reform in the public and in industry

  16. Information and Public Acceptance • It is therefore very important to give good information about the environmental problems that is going to be targeted and to underline that Environmental tax Reforms do have two sides: • Taxes on environmental harmful products, behaviour, land-use and non-renewable resources • Spending of revenues 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

  17. 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

  18. How to Spend the Revenues • Earmarking of revenue for environmental purposes – which will increase the overall tax burden • 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

  19. 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

  20. Revenues can stabilise green politics • Revenues are not the normal goal for green tax reforms • But do consider the revenues anyway since revenues tend to be rather steady while governments change • But argue always with the benefits for the environment, for the national economy and for the employment

  21. Public acceptance is the key problem for an Environmental Fiscal Reform • 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 negative 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 better hospitals too

  22. 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 Danish elections 2001.

  23. The DEC 2002 proposal for a Danish Green Tax reform • The Danish Environmental problems should be reduced • The income distribution should not be changed • Industry’s competitiveness should not be harmed • The total tax burden on households and industry should be neutral • More jobs should be created • In economic terms the proposed Danish Tax Reform would shift additionally 9% of the total Danish tax revenue from income taxation to environmental taxes gradually from 2002 to 2010 – so the total revenue from environmental taxation in 2010 will make up about 18,5% of the total tax revenue.

  24. Energy and GHG’s • Increase tax on extraction of oil and natural gas in the North Sea + 3.7 • Increase carbon tax + 3.8 • Increase energy tax for electricity in households + 6.3 • Increase energy tax for oil, coal and natural gas in households + 8.5 • Phase out rebates on carbon tax for energy extensive industry + 1.7 • Lower rebates on carbon tax for energy intensive industry + 1.9 • Taxing Carbon emissions from flaring from oil platforms + 0.3 • All numbers in billion DKK - 1 billion DKK is apx. 33.5 billion HUF

  25. Transport • Increase taxes on Petrol and diesel + 1.0 • Introduce road pricing differentiated according to environmental performance of cars + 10.8 • Increase steps in the environmental car owner tax (steps moved 5 km/litre) + 2.0 • Increase registration tax for energy ineffective cars + 1.0 • Remove tax rebates for transport to job + 2.0 • Tax fuel for airplanes and ferries/ships + 5.3 • Tax diesel vehicles without particle filters – Reverse for installation of filters Neutral • Tax fuel use for Public transport – Reverse as subsidy for labour costs for drivers Neutral • Tax energy extensive electrical appliances and subsidy energy effective appliances Neutral

  26. Others • Increase tax on pesticides + 0.1 • Industry pays full tax on piped water + 0.7 • Increase tax on chlorinated solvents + 0.0 • Tax unwanted chemicals + 3.0 • Increase tax on solid waste + 0.7 • Increase tax on waste water + 0.5 • Tax advertising, e.g. handouts, fliers, commercials, brochures + 4.0 • Increase tax on PVC and phthalates + 0.1 • Tax high pressure treated wood and timber + 0.0

  27. Remove Environmentally Harmful Subsidies • Reorganize or remove subsidies for agriculture • Remove subsidies for energy based on fossil fuels or nuclear • More jobs and a broadened tax base gives an effect • Savings in expenditures for environmental damage

  28. Use of the Revenue / Neutrality • Reduce the rate of ordinary income tax low bracket from 5,5 % to 1,0 % - 30.3 • Increase the income tax threshold with 5.000 DKK - 8.0 • Reduce the VAT on organic food products and ecolabelled products - 2.0 • Social compensations by increasing child allowances, educational aid, retired peoples pensions and other social allowances - 6.0 • Compensation for higher green taxes to industry according to labour expenses - 6.2 • Funding for introducing cleaner technology - 2.5 • Changing taxation and write offs for environmental friendly investments - 1.5 • Increase investments in railway, tram, metro, bus light rail - 1.0 • All together - 57.5