International Experiences of Ecotaxes: A Few Lessons

Abstract

AbstractThere are countries which have implemented ecotax system; here, in order to understand the ecotaxes world over, an extensive examination of the international experiences of fifteen countries has been undertaken so as to comprehend the relative experiences in not just levying ecotaxes but also for analysing the status of other fiscal instruments such as subsidies, rebates, etc. The two primary questions explored in this chapter are: first, what is the superiority and limitations of ecotaxes over other Environmental Fiscal Instruments (EFIs) and what lessons can India deduce from the design of EFIs in other countries? To answer these questions, the experiences are analysed and categorised into two groups: OECD and emerging economies. Former group consisted of eleven OECD countries, and of these, five were Nordic, and others included Australia, Canada, Netherlands, Germany, United Kingdom and United States of America. Among the emerging economies, Brazil, India, China and South Africa were chosen so as to make the analysis comparable. The revenues from these taxes were computed and examined. The explanations for the computed revenues in the fifteen countries have been deduced from: the analyses of the data points, mathematical reasoning, policies adopted and the variances in the tax rates. The major outcome of this analysis is that energy taxes followed by transport taxes were the most prevalent forms of ecotaxes across the OECD countries. Further, pollution taxes could be difficult to implement because such instruments would require complex and costly administrative and technological structures. The revenue as a proportion of GDP and total tax revenue in OECD countries ranges from 2 to 4% and 5 to 10%, respectively, with US and Canada being an exception. On the other hand, for emerging economies ratio of revenue to GDP and total net indirect tax revenue is between 0 to 1% and 1 to 10%, respectively. All these results could be explained from the fiscal policies followed by these countries. The OECD/EEA database, which is the only major database, did not comprehensively compile the EFIs of developing countries, especially that of India.