Ecotax

Ecotax

News: Recently, there has been growing awareness of the imposition of environmental taxes, and a very large basket has already been designed in different countries.

What is an Ecotax?
• An ecotax is a tax whose tax base is defined so as to internalize the negative externality generated either from the production/consumption/extraction behavior in an economy.
• Such taxes are intended to discourage the overuse of natural resources that damage the ecology.
• According to the OECD (2006), there are about 375 environmentally related taxes in the OECD countries. The evolution of these taxes has shown that most revenue comes from energy, motor vehicle and transport taxes

How Fiscal instruments can be used to support Ecological issues?
• Carbon taxes are the most contentious fiscal instruments widely discussed which serve the dual purpose of acting as deterrent and raising resources from activities that impact sustainable economic development.
• Landfill tax in the UK was introduced to encourage recycling so that fewer waste can be sent for landfilling.
• Taxes introduced in plastic bags in Ireland (2002) helped reduce the plastic litter from 5% to 0.13% in 2015.
• Tax on nitrogen emissions in Sweden was introduced in 1992 to discourage activities with nitrogen emissions which resulted in a reduction in nitrogen emissions by 30-40%.