OECD

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"The impact of revenue-raising objectives on optimal tax levels is empirically difficult to establish, but different models indicatie that the marginal economic cost of tax distortions is lower for environmentally related taxes than for labour taxes (e.g. Groothuis, 2016). This would imply that an equal revenue tax shift from labour taxes to taxes on energy use, e.g. by aligning taxes on energy use with the external costs of energy use, reduces the overall economic cost of raising the given amount of revenue. Note that considerations related to revenue-raising are unrelated to the funding needs in a particular sector. Imposing sector-specific budget constraints can potentially be useful for regulatory or political economy reasons (not considered in this report) but are not productive from a public finance point of view." 

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- From: OECD (2018), Taxing Energy Use 2018


"A more growth- and equity-friendly tax system can be achieved by shifting the tax burden toward immovable property, broadening the tax base and reducing the fragmentation of the tax system. A shift to environmental taxation can also help improve the sustainability of growth and well-being, provided measures are taken to ensure that lower-income households are not disproportionately impacted by green taxes. ... Reductions in labour or corporate taxes are generally recommended alongside increases in indirect taxes"

"high labour tax wedges can reduce firms' labour demands by driving up the cost of labour (due to high employers' contributions or payroll taxes). As a result, high labour tax wedges are associated with lower employment and hours worked as well as higher unemployment. Such detrimental effects are stronger for workers already facing foremost labour demand-side obstacles, generally the youth, the disabled and the low-skilled, and the elderly. Too high, ill-designed social security provisions and tax wedges are also major drivers of labour informality in emerging-market countries, reflecting both labour demand and supply-side obstacles. Reducing labour taxes, including through cuts in social security contributions, thus remains a priority for many advanced and emerging-market countries".

- From: OECD (2018) Economic Policy Reforms 2018. Goin for Growth Interim Report.


"Importantly, increased or more effective use of environmentally related taxes can drive growth-oriented reform (by shifting the tax burden away from more distortive taxes, e.g. on corporate or personal income) and contribute to fiscal consolidation (i.e. by reducing government deficits and debt accumulation)."

- From: OECD (2015), Towards Green Growth? Tracking progress

 

"Countries continue to support fossil fuel production and consumption in many ways. Not all fossil fuels are treated equal. Variations in energy tax rates, uneven price signals, low levels of taxation on fuels with high environmental impacts, and exemptions for fuel used in some sectors impede the transition to a low-carbon economy. Coal is usually the least heavily taxed of all fossil fuels but the most carbon-intensive fuel available for electricity generation. This suggests important opportunities for reforming countries’ tax systems, aligning policies and achieving environmental goals more cost- effectively.

The use of environmentally related taxes is growing but remains limited compared to labour taxes. The revenue they raised represented about 1.6% of GDP in 2013. It is dominated by taxes on energy (69%) and on motor vehicles and transport (28%). Variations in energy tax rates, uneven price signals, low levels of taxation on fuels with high environmental impacts, and exemptions for fuel used in some sectors impede the transition to a low-carbon economy. Many countries still apply higher taxes for petrol than for diesel, and the share of taxes in end-use prices is generally higher for households than for industry.

The level of taxation of energy relative to that of labour can influence the relative price of inputs, affect labour demand and stimulate the use of energy from cleaner sources."

-From: OECD (2015), Environment at a Glance 2015: OECD Indicators, OECD Publishing, Paris.

 

'If governments are serious in their fight against climate change, the core message of this reform must be that the cost of CO2 emissions will gradually increase, creating a strong economic incentive to reduce the carbon entanglement and to shift towards a zero carbon trajectory. A central feature of such an approach is placing a price on carbon.'

'Extending and improving the use of carbon taxes and emissions trading schemes is a necessary first step. Governments also need to reform the estimated USD 55-90 billion of support provided each year to fossil fuel exploration, production and consumption in OECD countries.’

'(...) most governments tend to recycle the revenue from carbon taxes back to consumers through reductions in income taxes, especially for low-income households most affected by the carbon taxes, or to increase the budget allocation for social services.' 

- From: OECD (2013) Climate and Carbon. Aligning Prices and Policies. OECD Environment Policy Paper n°01. 


‘Water security objectives could be met in a more cost effective manner by using market instruments, such as water taxes (e.g. abstraction taxes, pollution taxes). These taxes provide incentives for polluters and resource users to change their behaviour today. They also provide long term incentives to innovate for a more water secure future tomorrow.’  

‘The revenue from water taxes can be used to strengthen the budget balance; to finance increased spending or to reduce other, distortionary taxes.’

- From: OECD (2013) Water security for better lives. OECD studies on water. OECD publishing.

 

"Increased use of environmentally related taxes can play an important role in growth-oriented tax reform by helping to shift part of the tax burden away from more distortive corporate and personal income taxes and social contributions." 

- From: OECD (2011) Towards Green Growth