Task Force on Environmental transfers of the Working Group on Environmental expenditure statistics Review of outstanding issues Meeting of 18 October 2011 Stockholm

Content: OPERATIONAL ISSUES Distinguishing and reporting taxes, fees and rent payments Problems with defining a tax as an environmental one Problems with allocating an environmental tax to an environmental tax category (energy, transport, pollution and resources) Borderline cases of environmental taxes VAT October, 2011 Environmental taxes, Review of outstanding issues

Operational issues Table 9, DG TAXUD and National Tax List Only payments identified as taxes according to national accounts can be reported as environmental taxes. The definition used and categorisation made in the national accounts of the country in question should be used for the environmental tax statistics Other types of compulsory payments to government, considered relevant, should be reported as memo items. October, 2011 Environmental taxes, Review of outstanding issues

Distinguishing and reporting taxes, fees and rent payments Payments that are defined as taxes in ESA95 should be reported as environmental taxes. Those considered in ESA95 as fees or rent should be reported as memo items. Most environmental taxes will be found under the ESA95 categories: D21 (taxes on products), D29 (other taxes on production) or D59 (other current taxes); For coherence between national and environmental accounts, the tax revenues reported in the Questionnaire for environmental taxes by economic activities to Eurostat should be identifiable in the NTL October, 2011 Environmental taxes, Review of outstanding issues

Rent payments Rent on a natural resource that is collected in the form of a tax – a property income, not a tax Often in the form of extra profit taxes In principle, in the national accounts such taxes should be recorded as property income (D.45) and not as taxes. October, 2011 Environmental taxes, Review of outstanding issues

Problems with defining a tax as an environmental one A starting point for deciding whether a given tax (once established as a tax according to the definition of national accounts) is environmental is again the definition of Regulation 691/2011 The definition puts emphasis on the effect of a given tax in terms of its impact on the cost of activities and the prices of products that have a negative effect on the environment. October, 2011 Environmental taxes, Review of outstanding issues

Defining a tax as an environmental Tax base – an environmental tax is a tax on a tax base which has a specific negative impact on the environment Instead of trying to elaborate a formal definition of tax bases that have a particular environmental relevance, it was decided to produce a list of tax bases, and to consider all taxes levied on these tax bases as environmental taxes. October, 2011 Environmental taxes, Review of outstanding issues

How to decide in practice whether a tax (e. g How to decide in practice whether a tax (e.g. a newly introduced tax) is an environmental tax when its tax base is not (yet) included in the list of environmental tax bases? It could be recommended booking as environmental taxes on outputs, specific inputs as well as taxes on assets used in production of environmentally harmful products, or any other tax that raises variable or fixed production costs We would exclude profit taxes because of their distant and uncertain impact on the volume of output. October, 2011 Environmental taxes, Review of outstanding issues

The members of the TF are asked to give their opinion on the proposed clarification of the definition of environmental taxes. October, 2011 Environmental taxes, Review of outstanding issues

Problems with allocating an environmental tax to an environmental tax category (energy, transport, pollution and resources) Representativeness and possible bias in data sample - environmental taxes, particularly those levied on pollution, may often raise little revenue which could be as a result not listed separately in the NTL. A similar bias may emerge if NSO treat differently the distinction between taxes and fees tax having several bases, only part of which belong to a particular type of environmental tax - the revenue of the tax should be broken down, using estimates if a measure is not available, according to the different bases and attributed accordingly October, 2011 Environmental taxes, Review of outstanding issues

PROBLEMS allocating Env Taxes Lack of knowledge about specificities of the tax at booking; definition wrongly driven by legal purpose of the tax or national convention. Reassessment of all bookings once the new methodological guidelines are published; communication and coordination effort. The attribution to Statistical Offices of the booking of environmental taxes should by itself alleviate the problem.  October, 2011 Environmental taxes, Review of outstanding issues

The members of the TF are asked to report about any problems they faced in practice with allocating an environmental tax to one of the 4 categories energy, transport, pollution or resources. October, 2011 Environmental taxes, Review of outstanding issues

Borderline issues National tax statistics and government finance statistics are the main sources of data on revenue for the different kinds of taxes. Value added type taxes (VAT) are excluded from the definition of environmental taxes. October, 2011 Environmental taxes, Review of outstanding issues

VAT AND ENVIRONMENTAL TAXES VAT is a tax levied on all products (with few exceptions), and it is deductible for many producers, but not for households – it does not influence relative prices in the same way that other taxes on environmental tax bases do. VAT is often not available by product. Environmentally -related revenues would have to be estimated using information on VAT rates combined with estimates of the total sales of the products and taking account of exemptions and deductibility of the VAT. October, 2011 Environmental taxes, Review of outstanding issues

Should an exception be made for the part of VAT which falls on an environmental tax? Some specific cases – Austria and Spain Another issue is that the tax system may be designed so that VAT is levied on an environmental tax. This is not the full VAT on e.g. an energy product, only the part that fall on the environmental tax. And it should only be the non-deductible part of that part of the VAT. No sources to estimate this precisely – the amount must be modelled based on assumptions about who uses the taxed product, the level of tax exemptions applied etc. The resulting amount – rather small compared to the environmental taxes it is levied on. October, 2011 Environmental taxes, Review of outstanding issues

CONCLUSIONS FOR VAT and Env Taxes For practical reasons, since this type of revenue can be difficult to estimate and is quite small, the VAT should remain excluded from the definition for environmental taxes used. For national purposes, countries may decide to identify certain parts of VAT, especially when this has an impact on the comparability over time.  The members of the TF are asked to give their opinion on the VAT question view of reaching a decision regarding its methodological treatment. October, 2011 Environmental taxes, Review of outstanding issues

The members of the Task Force are invited to share their views on the differences and borderline cases identified in the Doc. ENV/ERT/TF/ 03 (2011) Members (especially from the countries concerned by the cases in the document) are requested to provide more information where necessary and to give their opinion on these cases so that a final decision could be taken on how the taxes should be classified with the purpose of improving the methodology. October, 2011 Environmental taxes, Review of outstanding issues

The list of tax bases for review by the TF The list of tax bases that is included in the 2001 Eurostat statistical guide on environmental taxes may need some updates. A new draft revised list is available as a Room Document Eurostat list of environmental tax bases which may require a number of refinements and clarifications. October, 2011 Environmental taxes, Review of outstanding issues

THANK YOU FOR YOUR ATTENTION! ☺ STELA.STAMATOVA@EC.EUROPA.EU October, 2011 Environmental taxes, Review of outstanding issues