ESTP course on environmental taxes

ESTP course on environmental taxes
Sacha Baud Eva Milota Directorate Spatial Statistics Vienna 23 – 25 May 2012 Definition, taxes, tax bases etc.

Definition of environmental taxes: ‚A tax whose tax base is a physical unit (or a proxy of a physical unit) of something that has a proven, specific negative impact on the environment, and which is identified in the ESA 95 as a tax‘.

Definition of environmental taxes: ‚A tax whose tax base is a physical unit (or a proxy of a physical unit) of something that has a proven, specific negative impact on the environment, and which is identified in the ESA 95 as a tax‘. ESA 95 definition of a tax: A tax is a compulsory, unrequited payment, in cash or in kind which is levied by general government, or by the Institutions of the European Union. Distinction between taxes and sales of services (charges, fees etc.) – more under borderline cases.

Definition of environmental taxes: ‚A tax whose tax base is a physical unit (or a proxy of a physical unit) of something that has a proven, specific negative impact on the environment, and which is identified in the ESA 95 as a tax‘. Tax base: There is no formal definition of tax bases. Instead a list of tax bases has been developed and all taxes levied on these tax bases are considered as environmental taxes. Tax bases can be products, assets or other taxable events.

Definition of environmental taxes: ‚A tax whose tax base is a physical unit (or a proxy of a physical unit) of something that has a proven, specific negative impact on the environment, and which is identified in the ESA 95 as a tax‘. Proxy of a physical unit: Sometimes it could be difficult to get data of a tax base. In these cases proxies can be used, e.g.: Use of petrol or fuel oil as proxy for SO2 or NOx emissions. Duty for airways security as proxy for emissions from air transport.

Groups of environmental taxes: a) Energy taxes (including fuel for transport) They include taxes on energy products used for transport and stationary purposes. The most important energy products for transport purposes are petrol and diesel. Energy products for stationary use are e.g. fuel oils, natural gas, coal and electricity. Furthermore this group also encompasses CO2 taxes, if identifiable.

Groups of environmental taxes: b) Transport taxes (excluding fuel for transport) These taxes mainly consist of taxes related to ownership and use of motor vehicles. This group also includes taxes on other transport equipment (e.g. planes, ships) and related transport services (e.g. duty on charter or scheduled flights) when they conform to the general definition of environmental taxes. c) Pollution taxes They encompass taxes on measured or estimated emissions to air and water, management of solid waste and noise. CO2 taxes are covered by the energy taxes group.

Groups of environmental taxes: d) Resource taxes (NEW definition in the questionnaire) For international comparison purposes all taxes on oil and natural gas extraction should be excluded from environmental tax statistics. All other taxes on resource extraction (e.g. mining taxes, taxes on water, forests, wild flora and fauna) should be included. The main reasons for exclusion of taxes on oil and natural gas extraction are that they are often used to capture the resource rent (new example: a tax planned in RO), that only a few countries are concerned (comparability across countries and over time) and differences in the tax systems (royalties, exploitation fees etc.). For national purposes they can be included.

Taxes according to ESA 95: The main characteric of a tax according to ESA 95 is that it is a compulsory, unrequited payment, i.e. a payment without any return in service by the government or by the European Union. Definition of a tax in ESA 95 differs from the legal definition. For consistency and comparability reasons it is therefore suggested to use tax data reported under ESA 95. Another reason is that the amount of environmental taxes has to be consistent with the amount reported in the national tax list.

Taxes according to ESA 95: ESA 95 categories relevant for environmental taxes: Taxes on production and imports (D.2) They consist of compulsory, unrequited payments, in cash or in kind which are levied by general government, or by the Institutions of the European Union, in respect of the production and importation of goods and services, the employment of labour, the ownership or use of land, buildings or other assets used in production. These taxes are payable whether or not profits are made.

Taxes according to ESA 95: ESA 95 categories relevant for environmental taxes: Taxes on production and imports (D.2) Taxes on products (D.21) Value added type taxes (VAT) (D.211) Taxes and duties on imports excluding VAT (D.212) Import duties (D.2121) Taxes on imports excluding VAT and duties (D.2122) Taxes on products, except VAT and import taxes (D.214) Other taxes on production (D.29)

Taxes according to ESA 95: ESA 95 categories relevant for environmental taxes: Current taxes on income, wealth, etc. (D.5) They cover all compulsory, unrequited payments, in cash or in kind, levied periodically by general government and by the rest of the world on the income and wealth of institutional units, and some periodic taxes which are assessed neither on the income nor the wealth. They are broken down into: Taxes on income (D.51) Other current taxes (D.59)

Taxes according to ESA 95: ESA 95 categories relevant for environmental taxes: Capital taxes (D.91) They consist of taxes levied at irregular and very infrequent intervals on the values of the assets or net worth owned by institutional units or on the values of assets transferred between institutional units as a result of legacies, gifts inter vivos or other transfers.

Tax bases: Measured or estimated emissions to air: Measured or estimated NOx emissions SO2 content of fossil fuels Other measured or estimated emissions to air Ozone depleting substances (e.g. CFCs or halon) Measured or estimated effluents to water: Measured or estimated effluents of oxydisable matter (BOD, COD) Other measured or estimated effluents to water Effluent collection and treatment, fixed annual taxes

Tax bases: Certain non-point sources of water pollution: Pesticides (Based on e.g. chemical content, price or volume) Artificial fertilisers (Based e.g. on phosphorus or nitrogen content or price) Manure Waste management: Waste management in general (e.g. collection treatment taxes) Waste management, individual products (e.g. packaging, beverage containers) Noise (e.g. aircraft take-off and landings)

Tax bases: Energy products: Energy products for transport purposes Unleaded petrol Leaded petrol Diesel Other energy products for transport purposes (e.g. LPG or natural gas) Energy products used for stationary purposes Light fuel oil Heavy fuel oil Natural gas

Tax bases: Energy products: Energy products used for stationary purposes (continued) Coal Coke Biofuels Other fuels for stationary use Electricity consumption Electricity production District heat consumption District heat production

Tax bases: Transport: Motor vehicles, one-off import or sales taxes Registration or use of motor vehicles, recurrent (e.g. yearly) taxes Resources: Water abstraction Extraction of raw materials Other resources (e.g. forests) Deciding whether a tax is an environmental tax or not when its tax base in not (yet) included in the list of environmental tax bases?

Borderline cases: Borderline cases are cases which raise problems related to the classification, e.g. the distinction between: Taxes on products and taxes on production Taxes on land – classified as current or capital taxes Taxes and social contribution Taxes and sales of services The general government often use a definition of a tax which is different to that of national accounts. Therefore a payment to the government called „tax“ need not to be a tax, whereas a payment called e.g. licence could be a tax.

Borderline cases: a) Distinction between taxes and sales of services: (most important issue in relation to environmental taxes) For a tax the government doesn‘t provide a service whereas a sale is related to the provision of a service. Furthermore the amount of the payment needs to be in proportion to the costs of providing a specific service. If one or both conditions are not satisfied the payment is a tax. Examples for services are: driving licence, television or radio licence, waste disposal fee. Clarification needed with national accountants.

Borderline cases: Distinction between taxes and resource rent: A rent is a payment from a user or extractor of a natural resource to its owner. So, a rent is a property income and not a tax. If the owner of a natural resource is a government, it often happens that users or extractors have to pay very high profit taxes, e.g. one country example is a tax on the extraction of minerals and oil. These taxes consist of a tax part and an rent part. In general these taxes should already be classified in national accounts as property income (D.45). If this is not the case, a reclassification should be discussed with national accountants.

Borderline cases: c) Value added tax: In general, the value added tax is not an environmental tax. But if e.g. a mineral oil product is taxed with a mineral oil tax and then this joint amount (price + mineral oil tax) with a value added tax then a part of the VAT revenue is connected to the mineral oil tax. This part of VAT revenue has to be taken into account.

Borderline cases: Land taxes: For international comparisons land taxes should be excluded. In many countries land taxes are property taxes and levied on the value of the land or the real estate. But in some cases they are levied on the square meters of soil sealed (as it is the case for a part of the land tax). These differences and other problems concerning data availability are the reasons for excluding land taxes for international comparisons. Of course, for national purposes these taxes can be taken into account.

Tax exemptions and tax reductions: Tax laws and tax regulations often allow for tax exemption or tax reductions. In Austria e.g. some industries are exempted from paying the energy levy for some energy carriers or farmers could up to now ask for reimbursement of the mineral oil tax paid for Diesel for agricultural use. When distributing environmental taxes to the final tax payer, these exemptions and reductions have to be recorded in the period the taxes accrue.

Other environmentally relevant payments: They are not defined as taxes and are therefore not part of the obligatory data transmission set as defined in the legal base. But they are a further interesting information and can supplement environmental taxes at national level. Austrian examples are: Waste disposal fee, wastewater treatment fee, water supply fee Parking fee (public space) Highway tolls

Data sources: List of all government levies Starting point of the work. Identification of the tax base(s) of each tax. In general this information can be derived from tax laws and regulations. A cooperation with the responsible institution is proposed, e.g. Ministry of finance. If the tax base is included in the list of the Statistical Guide, then the tax is an environmental tax. Take care, that this list encompasses all payments to the government and that the governmental definition of a tax can differ from that of national accounts.

Data sources: National tax list (table 9 of the ESA transmission programme) Section 1 of Annex II of regulation (EU) 691/2011 requires that environmental taxes have to be consistent with the national tax list. So it is one of the main data sources. mic_analysis/tax_structures/article_5985_en.htm It is important to develop your own list of environmental taxes and then to check it with the NTL to ensure consistency; allocation of taxes to the same tax group; all environmental taxes have to be displayed in the NTL; if necessary merged taxes should be split up.

Data sources: Tax statistics Provide detailed information on taxes, social contribution and other government revenues broken down by type of tax or revenue and level of government. Taxes are recorded in the period they are paid. Government finance statistics Describe the economic activities of the government. These include government revenues, government expenditure, government deficit, transactions in assets, transactions in liabilities etc..

Data sources: Government finance statistics (continued) They are produced in accordance with the ESA 95, the EU manual for national accounts, supplemented by further interpretation and guidance from Eurostat. They include data on fees. Taxes are recorded in the period they are paid. National accounts Use tax statistics and GFS as data source but apply a different recording principle, i.e. they are recorded in the period they accrue whether or not they are actually paid in that period.

Allocation of environmental taxes: Allocation to an environmental tax group Allocation to the final tax payer Allocation to environmental domains (CEPA, CReMA, CRUMA, CPA) Ad a) Allocation to an environmental tax group Based on the tax bases list it should be easy to allocate each environmental tax to the proper tax group (energy, transport, resource, pollution). Problems can occur when e.g. (1) in the NTL some taxes with minor revenues are grouped together or when (2) taxes have several tax bases.

Allocation of environmental taxes: ad a) Allocation to an environmental tax group (continued) Proposed solutions are (ad 1) to change the disaggregation of the NTL to display missing taxes or (ad 2) to split the revenue of a tax using measures or estimates if a measure is not available. ad b) Allocation to the final tax payer using NACE rev. 2 on A*64 level to producers by categories ‚households‘ and ‚non-residents‘ for consumers not allocated

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) There are two main approaches for the allocation of environmental taxes. The first approach is based on supply and use tables. The second approach is based on direct allocation of specific taxes, using further statistical or administrative data, like final energy consumption data, waste disposal data, number of annual registration of vehicles. Depending on national circumstances these two approaches can be mixed.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Supply and use tables They provide information on taxes and subsidies on products classified by product and user category. ESA 95 - Table 9.8 is a simple ‚taxes less subsidies‘ on products table. E.g. in Austria there are two tables for taxes on products, one for intermediate consumption and one for final consumption. A problem can occur when there are several taxes on the same product, e.g. on mineral oil products.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Supply and use tables In that case this approach should be used for the allocation of a specific environmental tax to the tax payer: if the share of each tax can be assumed to be equal for all users; if the revenue from each tax can be distributed in the same way as the total tax revenue on the product. If the shares are known to be different between users, but further information is available for the distribution, e.g. effective tax rates or physical data on tax bases.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Direct allocation of specific taxes These taxes can be distributed to the final tax payers using other available statistical or administrative data sources. Direct allocation is possible if e.g. a specific tax targets directly to one industry or the households or if each tax payer has the same tax burden. Example: In Austria a tax of € 109,- has to be paid for the registration of a car. Using the annual number of registrations of new and used cars and the profession of the owners the total amount can be distributed to industries and households.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Using effective tax rate ‚Effective tax rates‘ mean the taxes actually paid per unit of the different products and activities. It should reflect exemptions, reduced rates etc. in addition to the nominal tax rates. If such effective tax rates are reasonably reliable estimates they can be multiplied with physical data on emissions or traded products to calculate the tax revenue for a tax base. Note that the effective tax rate can differ across industries and sectors.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Using physical data on tax bases An environmental tax can be related to only one tax base or to several tax bases. E.g. the taxe bases for a mineral oil tax can be unleaded petrol, leaded petrol, diesel and light fuel oil. In this case the effective tax rate should represent the weighted average tax rate of all concerned tax bases, with the physical volumes of emissions or traded goods as weights. For the distribution of such tax revenues additional information is necessary.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Using physical data on tax bases (examples for tax bases) One source for physical data on the tax bases could be the tax authorities, because they often use such information for the assessment of tax payments. Other sources could be environmental economic accounts like air emissions accounts, physical energy flow accounts or other NAMEA type accounts. Energy balances also provide physical data on tax bases – supply side and use side information.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Using physical data on tax bases (examples for tax bases) Volume of emissions for emissions taxes Traded volumes for product taxes Market prices for environmental products Market prices per unit of a traded good can also be used to estimate the amount of environmental taxes paid by tax payers. This makes sense for relatively homogeneous products, like energy products - price information from energy price statistics.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Market prices for environmental products For other products average prices could be derived from the unit calculating the Consumer Price Index. If the calculation of average prices is to complex and time consuming one can use national accounts data, e.g. expenditure on vehicles for household consumption and gross fixed capital formation and then to divide them with the number of registrations.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Austrian examples Mineral oil tax: Up to the last year distribution by using final energy consumption from energy balances; now final energy consumption from energy accounts. Energy levy: like mineral oil tax Motor vehicle tax: Distribution on the basis of the stock of vehicles and the profession of the owners. Motor vehicle registration tax: € 109,- / registr. of a new/used car; distribution by stock of registered cars and profession of the owner.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Austrian examples Motor related insurance tax: distribution based on information on intermediate costs in industries and consumption of households. Levy on motor vehicles based on fuel consumption: distribution based on information from use tables on investments of industries in product CPA 29 (vehicles and parts) and on consumption of households of that product. Levy for hunting and fishing: allocated to agriculture; but levy for fishing should maybe be reallocated to households.

Allocation of environmental taxes: ad b) Allocation to the final tax payer (continued) Austrian examples Viennese tree protection levy: allocated by expert estimation to private households and service industries Levy for landscape protection and nature conservation: allocated by expert estimation to NACE 23 – Manufacture of other non- metallic mineral products and NACE 49 – Land transport and transport via pipelines. Levy on dangerous wastes: Distribution based on taxes on products for intermediate consumption.

Definition, taxes, tax bases etc. Please address queries to: Sacha Baud Eva Milota Contact information: Guglgasse 13, 1110 Vienna phone: +43 (1) +43 (1) fax: +43 (1)

ESTP course on environmental taxes

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