Environmental taxes: Sources and methods

Environmental taxes The environmental tax account is an environmental activity account. It records transactions undertaken within the economy for reducing the negative effects of activity on the environment. Environmental taxes reflect efforts by governments, on behalf of society, to influence the behaviour of producers and consumers with respect to the environment (United Nations, 2014, para 4.1). There is considerable interest in the use and effectiveness of these taxes as they show a direct response of countries to manage environmental change through economic instruments. Environmental taxes are one of six SEEA accounts that European Union countries are required to produce under legislation (see Environmental accounts – establishing the links between the environment and the economy). In addition to SEEA guidance, compiling environmental tax accounts is further described in Eurostats’ Environmental taxes: A statistical guide – 2013 edition. Defining environmental tax The SEEA central framework defines environmental tax as 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. The SEEA central framework (United Nations, 2014, para 4.150) states that, in practice, this definition is applied by looking at all the various taxes levied in a country and determining whether the tax base in each circumstance is something that has a negative environmental impact. The Eurostat guidance emphasises that: taxes may be collected with more than one purpose but will generally be included if they apply to products or activities that have an adverse effect on the environment tax accounts be consistent with the definition of taxes within the System of National Accounts (SNA). Environmental taxes can be one of four bases (referred to subsequently and in the report as types): energy, transport, pollution, and resource. Energy taxes (including fuel for transport) Energy products used for transport purposes unleaded petrol leaded petrol diesel other energy products for transport purposes (eg, LPG, natural gas, kerosene, or fuel oil). Energy products for stationary purposes light fuel oil heavy fuel oil natural gas coal coke biofuels electricity consumption and production district heat consumption and production other energy products for stationary use. Greenhouse gases carbon content of fuels emissions of greenhouse gases (including proceeds from emission permits recorded as taxes in the national accounts). Transport (excluding fuel for transport) Motor vehicles import or sale (one off taxes) Registration or use of motor vehicles, recurrent (eg, yearly taxes) Road use (eg, motorway taxes) Congestion charges and city tolls (if taxes in national accounts) Other means of transport (ships, airplanes, railways, etc) Flights and flight tickets Vehicle insurance (excludes general insurance taxes). Pollution Measured or estimated emissions to air measured or estimated NOx emissions measured or estimated SOx emissions other measured or estimated emissions to air (excluding CO2) Ozone-depleting substances (eg, chlorofluorocarbons or halons) Measured or estimated effluents to water measured or estimated effluents of oxydisable matter (biochemical oxygen demand, chemical oxygen demand) other measured or estimated effluents to water effluent collection and treatment, fixed annual taxes Non-point sources of water pollution pesticides (based on eg, chemical content, price, or volume) artificial fertilisers (based on eg, phosphorus or nitrogen content or price) manure Waste management collection, treatment, or disposal individual products (eg, packaging, beverage containers, batteries, tyres, lubricants) Noise (eg, aircraft take-off and landings). Resources Water allocation Harvesting of biological resources (eg, timber, hunted and fished species) Extraction of raw materials (eg, minerals, oil, and gas) Landscape changes and cutting of trees. Other Taxes related to biodiversity protection International visitors levy These transactions are recorded in SNA but are not specifically related to the environment. The environmental taxes presented in national accounts (industry production and investment) are a subset of the total taxes on production and imports. For the first time in the March 2023 release of Environmental-economic accounts: Data to 2021 we have added a new type of tax. This is because some threats to the environment such as biodiversity loss and damage due to over tourism were not captured in the Energy, Transport, Pollution or Resources tax bases. These taxes are now recorded but are mainly unallocated as – under SEEA and SNA, only activities of resident economic units (including households) are included, those for non-residents are excluded. Annual national accounts sources and methods defines taxes as compulsory, unrequited payments, in cash or in kind, made by institutional units to government units. They are described as unrequited because the government provides nothing in return to the individual unit making the payment, although governments may use the funds raised in taxes to provide goods or services to other units, either individually or collectively, or to the community as a whole. The full classification of taxes on production and on imports consists of: taxes on products, for example excise duty on alcohol, or the gambling levy value added tax (VAT) – in a New Zealand context, GST taxes and duties on imports, excluding VAT import duties, this means taxes levied on imports that are specific to importing taxes on imports excluding VAT and duties – in New Zealand these include excise duty on alcohol imports, as the rate is consistent with the excise duty on domestic alcohol production export taxes other taxes on production – this includes taxes not elsewhere covered, including land rates and taxes on pollution such as carbon taxes. SNA 2008 (SNA08) notes that governments are increasingly turning to issuing emission permits as a means of controlling total emissions. The permits do not involve using a natural asset (no value is placed on the atmosphere, so it cannot be considered an economic asset) and are therefore classified as taxes even though the permitted ‘activity’ is one of creating an externality. It is inherent in the concept that the permits will be tradeable and that there will be an active market for them. These permits are recognised as tax revenue within the national accounting framework to the extent to which payment is received by government. In 2018, Stats NZ updated the treatment of Emissions Trading Scheme (ETS) transactions to be more aligned with international economic-accounting standards for the treatment of carbon credits. Specifically, the tax level is set to zero when the government allocates credits to emitters under the ETS but does not require payment. This treatment is replicated in the environmental taxes account. This contrasts with the New Zealand Treasury treatment of the ETS, where tax revenue is based on the value of surrendered permits. Goods and sales tax (GST) is not considered an environmental tax even though in some instances GST may be levied against the consumption of goods which have a negative effect on the environment (eg, GST on electricity or equipment which combusts fuels). Data source Data for the environmental tax account is sourced from the national accounts. The New Zealand System of National Accounts measures taxes on production in a standard way across all industries. National totals are derived through the Treasury’s CFIS, a secure website that collects actual and forecast information from government departments, Crown entities, and state-owned enterprises. Taxes are allocated on a proportional basis to industries. The proportions used are derived mainly from taxes and subsidies data collected though the annual enterprise survey (AES). Method An assessment is first made on whether the tax base in each circumstance is something that has a negative environmental impact. The following are useful guides for making these decisions: SEEA 2012, Environmental taxes – a statistical guide – 2013 edition, and Environmental taxes: 2014. The individual taxes are then allocated to industry. Where specific information is available, generally supplied by the administrative agency responsible for each tax, then we could do this with some confidence. Where taxes are allocated using proportions derived from AES, they are generally allocated at the total aggregated level within the national accounts systems. For this reason, we are less confident in the industry allocation for some taxes and therefore, the figures for breakdown of environmental taxes by industry should be interpreted with caution. Tax proportions for the following agriculture industries are particularly limited: AA111 horticulture and fruit growing AA121 sheep, beef cattle, and grain farming AA131 dairy cattle farming AA141 poultry, deer, and other livestock farming. It is therefore hard for these industries to separate local authority rates (which are not covered under environmental taxes) from other taxes. To be able to proceed with an industrial breakdown of environmental taxes, we assumed that for energy and transport taxes the AA1 industries have similar levels of tax payments to the AA2 and AA3 industries below. This is an area for future improvement but consistency with the national accounts taxes on production needs to be maintained. AA211 forestry and logging AA311 aquaculture AA312 fishing AA321 hunting and trapping AA322 agriculture, forestry and fishing support services. Environmental taxes data are available at the New Zealand Standard Industrial Output Categories (NZSIOC) level 1 classification, which is a 19-class aggregation of all ANZSIC06 industrial codes. Ideally, we would produce environmental accounts at the more detailed NZSIOC level 3 classification to be consistent with the annual national accounts. This work will be prioritised for the next release of environmental taxes. For all industries except AA1 agriculture, proportions are available from AES for the years 2007–16. Before 2007 the proportions were available under the ANZSIC96 classification rather than ANZSIC06. Although backdating was done for the taxes on production and imports series in the national accounts, it was not done at a sufficiently detailed level to be able to re-compile environmental taxes. For this reason, we held the 2007 AES proportions constant for the 1999–2007 period. Presentation of environmental taxes and total taxes We present environmental taxes in total and by tax category (tax base), industry, and as a comparison to all revenue from taxes and social contributions. The Eurostat manual recommends presenting the share of environmental taxes to total revenue from taxes and social contributions as an indicator. Where total revenue from taxes and social contributions includes all taxes (D.2, D.5, and D.91) and actual or imputed social contributions (D.611 and 6.12). Presentation of this indicator means any shift in the tax burden as part of green tax reform can be examined over time. This indicator is also useful for international comparability. Table 8 TAXES GLOSSARY Taxes on production and imports (D2) These include: Taxes on products (D21) Other taxes on production (D29) Current taxes on income, wealth, etc. (D5) These include: Taxes on income (D51) Other current taxes (D59) Capital taxes (D91) Net social contributions (D61) These include: Employers' actual social contributions (D611) Employers' imputed social contributions (D612) Note: Social contributions are actual or imputed payments to social insurance schemes to make provision for social insurance benefits to be paid. (SNA08 8.16 p158). Capital taxes consist of taxes levied at irregular and 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. (SNA08 10.207 p217). Source: System of National Accounts 2008 References United Nations (2014). System of Environmental-Economic Accounting 2012 – Central framework (PDF, 4.40MB). en-NZ