Environmental taxes could add €35bn to EU revenue by 2016

Around €35bn (£29bn) of additional revenue could be raised by introducing or extending environmental taxes across twelve European Union Member States, new research suggests.

The EU study identified the potential for environmental fiscal reform (EFR) in Austria, Hungary, Italy, Belgium, Croatia, Lithuania, Czech Republic, Poland, Estonia, Romania, France and Slovakia.

According to the research, additional tax revenues could rise to €101bn by 2025 across the twelve countries if a range of tax recommendations are implemented.

Recommendations include new taxes, or changes to existing taxes, covering energy, transport, air pollution, landfill, incineration, packaging, plastic bags, abstraction of water, discharge of waste waters, fertilisers, pesticides and aggregates.

In addition, the research suggests that there is scope for revenue savings from removing environmentally harmful subsidies.

The study was carried out under the European Semester process, which seeks to ensure that economic policies are sustainable, not only economically and socially, but also environmentally.

According to Eunomia Research and Consulting, who carried out the study, the Annual Growth Survey, which kicked off the Semester process, indicated that “recovery in Europe does not mean getting back to ‘business-as-usual'”, and that tax should be designed to be more “growth-friendly”.

For instance, by reducing taxes on labour and raising more revenue through taxes which help combat environmental degradation and improve resource efficiency, it said.

Eunomia’s chairman, and the project director, Dominic Hogg said: “The measures we have suggested could raise more than EUR 100 billion in real terms by the next decade. This could contribute to fiscal consolidation or be used as part of a tax shift.

“In either case, this can reduce the extent to which countries resort to taxes which are more detrimental to economic growth and employment, and deliver environmental benefits. We hope that Member States will consider these suggested changes as part of their reforms arising out of the European Semester process.”

Acknowledging the importance of EFR EU Environment Commissioner Janez Potočnik said: “Environmental fiscal reforms have the potential to almost double the revenues they currently bring to national treasuries, with benefits for our environment as well as scope for cutting taxes on employment or cutting the deficit. That’s a powerful argument for changing the status quo.”

The study is expected to feed into the development of country specific recommendations to be proposed by the Commission as part of the Semester process.

Leigh Stringer

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