CrisisWatch

Portugal sees crisis as opportunity for green tax reform

An integrated green tax reform proposal was recently announced by the Commission for Green Tax Reform, which was established by the Portuguese Finance Ministry in January 2014. Following a period of consultation with business, scientific and civil organisations, the report was submitted by the ad hoc commission to the Minister of State and Finances, the Minister of Environment, Spatial Planning and Energy and the Secretary of State for Tax Affairs, on September 15th. The Government is now expected to evaluate the proposals and decide on the next steps.

The proposed reforms, which are estimated to result in total public revenues of EUR164 million, cover the sectors of i) energy and emissions,  ii) transport, iii) water, iv) waste, v) urban and spatial planning, vi) forestry, vii) biodiversity and other. This increased tax revenue for the state coffers will result from the introduction of new taxes, the increase in existing taxes and the reduction or elimination of certain tax exemptions.

The main objective of the report is “to redefine the fundamental legal basis of the energy and environmental tax system, including, inter alia, the simplification of taxation and the revision of those essential elements that promote economic competitiveness, environmental sustainability and resource efficiency, under a more sustainable growth model”.

One of the main measures proposed is the imposition of a tax on the use of plastic bags. According to the report, Portugal accounts for the use of over 500 plastic bags per capita each year, approximately 466 of which are single-use. The commission proposed the imposition of a levy of 10 cents per bag, which was later reduced to 8 cents. Part of the revenue would be channeled to the national Fund for Nature and Biodiversity Conservation.

The measures proposed on emissions, primarily the tax on carbon and the introduction of a toll for the use of automobiles in cities, have caused much controversy, especially as  these aim to drive people towards the use of a mass public transport system that has been criticised as unsatisfactory. Also, the tax on fuel is expected to result in price hikes in the order of 0.92%-5.74% for unleaded gasoline and 1.12%-6.75% for diesel.

As stated by the commission and the Government, the reform proposal is neutral with regard to the total burden on taxpayers, since tax hikes on heavy footprint uses and products will be offset by tax reductions in sustainable policies and practices. According to Quercus, one of Portugal’s leading environmental organisations, now is the right time for this reform, since “Portugal is still paying policies and inadequate investments with huge economic and environmental damage, from which it must learn”. Quercus called on the Government to promote the reforms in an informative and clear manner, that will allow citizens and society at large to gain a deeper understanding, since it now risks being seen as just another unpopular tax policy.   

Read more: Report on green fiscal reform (in Portuguese), Quercus, Tax-News.

 

Last modified onSunday, 04 January 2015 15:32
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