AMRITSAR: Economic instruments can help deliver both a cleaner environment and a stronger economy These economic instruments can force/ compel producers to look for alternative, greener production methods and consumers to go in for greener products and services.

Taxes are one type of economic instrument, which can influence a whole range of decisions at the level of producers and the consumer's world wide.   By using such instruments, countries can increase the efficiency of their environmental policies. It is important to note that the use of environmental taxes and charges does not necessarily imply an increase in the overall tax burden . In this respect, a key idea is the "greening" of the current tax system by charging the structure of existing taxes. Revenues raised by means of green taxes can be used to reduce taxes elsewhere.

The government of India has taken numerous steps including fiscal measures to stem the deterioration of ecological environment.   Most of these steps have not worked effectively. The fiscal steps in this respect by govt. of India include pollution subsidies, i.e. tax concessions for pollution control need to be supplemented by the imposition of pollution taxes. Pollution (control) concessions do not force the polluters, as  would the  pollution taxes to adopt pollution control measures. Unfortunately, India has not paid attention to the system of pollution taxes to deter the polluters.

Environmental taxes can be a way of implementing the polluter pays principle by including environmental costs in the price of goods or services. The idea is that people should pay more for things that are bad environmentally speaking, and pay less for those things which are less harmful to the environment.

The most politically contentious proposal in Canada for the use of the tax system to achieve environmental objectives is the call by environmentalists concerned about global warming for a "Carbon-tax"- a tax on fuel which increases with the relative carbon content of the fuel, thus encouraging a shift to fuels which emit less carbon dioxide when burnt. Ontario in 1999 imposed a "gas guzzler tax", a sliding sales tax, intended to provide buyers with a financial incentive to purchase more fuel-efficient vehicles.

Advisory Committee on Business and Environment (ACBE) was an early proponent of the introduction of Landfill Tax. The landfill tax represents one of the first moves by the UK Government to transfer taxation away from labour towards pollution and resource use. For medium to large organizations the cost of the landfill tax stimulates the introduction of waste minimization and recycling schemes.

The Swedish environmentalists have succeeded in proposed sulphur tax. Taxes on motor fuels are extremely important instruments. Green taxation allows scope for increasing taxes on motor fuels. Other instruments in the transport sector are obviously of importance here, e.g. kilometer tax, vehicle tax, exhaust emission regulations etc.

Many countries including Brazil, Columbia and Japan charge a heavy forestry tax when felling is not compensated by equipment reforestation of the right natures.

Moreover, the use of auto-related taxes as a preventive measure for global warming is essential in order to ensure emissions' reduction that can meet the new fuel-efficiency standards. It is necessary to take supportive measures on the demand side that encourage consumers to choose fuel efficient vehicles.

All such taxes should be introduced and strictly enforced in India as well. Green taxes are one of the major policy instruments within complex environmental policy packages. However, there is growing evidence that green taxes can be effective in terms of environmental protection and thereby leading to economic development. These can contribute to a better integration of environmental and economic policies than the regulatory instruments.

 In Indian context, Green Economic Principles should be implemented and adhered to. As such following humble suggestions are submitted to the policy makers;

Selective "eco-sin taxes" to discourage a wide range of grey products and lifestyles. At the same time, taxes would be eliminated on green products and lifestyles. People should be able to avoid taxation by choosing green products and lifestyles.

Taxes should be designed to conserve resources and energy. Rather than taxing jobs and profits, taxes should be moved to resource use and energy consumption to reward conservation. The community should benefit from the use of commonly held resources. Using resources is a privilege, not a right, and the user should pay for the privilege. Resources must also be shared with future generations and other species.

Taxes should be designed to increase employment. Moving taxes onto resources and land use and off of incomes will make people less expensive to employ. Products produced by green production methods, which tends to use fewer resources and less energy will avoid taxation. As energy costs rise, the price of labor becomes more economical, and green products which tend to encourage value-added processes, will provide more high quality, skilled jobs than resource intensive products.

Resource taxes should be assessed as early as possible. Resources should be taxed before entering the manufacturing process in order to green all aspects of the manufacturing process from extraction to the finished product. Increasing taxes on resource and energy use will encourage resource and energy efficiency, innovation, reuse, repair, recycling and used material recovery.

Taxing unearned income is preferable to taxing earned income. The tax shift to resource use and community- generated land values will distribute income more fairly without dependence on income and business taxation to redistribute income. Taxing unearned income (resources, land) and not earned income (jobs, profits) will reduce the rich-poor gap since the rich are always in a better position to capture unearned or windfall income by their ability to hold assets that they do not have to consume.

Green tax shifting is revenue-neutral, not a tax break or tax grab. The taxes paid by businesses and individuals collectively will not change, but greener businesses and consumers will reduce their taxes. Grey businesses and consumers will pay higher taxes. Studies have shown that 50% of businesses and consumers will be unaffected or only slightly affected by tax shifting, roughly one quarter will realize tax reductions one quarter will be taxed more.

Pay for what you take, not for what you make. Businesses should not be taxed for hiring people or for earning a profit, but should be charged for using resources and polluting the planet. People should not be taxed for earning an income or purchasing products but should be charged for the value of land they own and the resources used in the products they buy. Resource use and polluting are privileges not rights, and businesses and consumers should pay for these privileges.

Resource use and community generated land value taxation are fairer. Resource use and land taxes are much simpler to collect and harder to evade than taxes on income and business profits. Since there are far fewer points of taxation than with traditional tax sources, a move to resource use and land taxation will reduce the size of the underground economy. The difficulty of evading these taxes will reduce the problem of overseas tax havens.

Green taxation increases international competitiveness. Eliminating taxes on domestic labour will reduce labour costs.
Taxes should encourage local, sustainable, value-added production over imports. Culturally unique products and services will be valued by green tax reform over mass production .the sale price should include the true costs of products, services and distances traveled and should be designed to encourage local, sustainable production.

Taxes should break up monopolies. The most important monopolies are resource monopolies and land monopolies. When a person or a business has control or exclusive rights over large amounts of a resource or large amounts of land, this person or business reaps windfall profits, which is unjust. These resources and this land belong to the community and if individuals are granted access to it they should pay a fair price for this privilege or right. Land Value Taxation aims to ensure that the wealth created by usage of land and resources that rightfully belong to the community accrue back to that community.
 Taxes should be applied only once. Rather than taxing the same wealth repeatedly through personal income, business income, sales, re-sale, interest capital gains, property transfer, inheritance, taxation should only impact the use of a resource and the ownership of land on a sustained basis ( i.e. property tax on site value).

Reducing distortionary taxes and direct subsidies and introducing appropriate adjustments in tax systems, in particular in the energy, transport and agriculture sectors, could bring about in the medium and long term not only environmental benefits but also economic benefits (increased economic and environmental efficiency). Therefore, we should examine the opportunities for greening the tax system taking into account the specific economic, fiscal and environmental context.

The Environment begins at home. Sensible green solutions save money, for the individual and for the nation. Better insulation in our homes, for example, can mean cheaper heating bills and less use of fossil fuels. Dealing with pollution at all levels is the priority: reducing exhaust fumes and harmful air particles from traffic; reducing rubbish in the streets; and reducing harmful chemicals in our local environment. The goal should be a minimal waste society.

People are concerned about the kind of world our children will inherit, and they are worried about the legacy we are creating for them. It is not that people don't care about the environment, but people often see the environment as a huge issue affecting the planet, almost too huge, not something they themselves can directly affect. We need to bring the environmental debate into local communities, and right into people's daily lives. Being green is about the decisions we take on the things we buy and even how we carry them home. It is about local planning decisions, taken by local people, in local town halls. It is about the place we work in – the creation of emissions by the companies we work for, and the products we produced. And ultimately, it is about our government being willing to take tough decisions at home and convince other governments. Challenging behaviour in the home, challenging behaviour of our businesses and challenging the behaviour of the government – these are the three key areas we must address if we are to change the patterns of behaviour that are so destructive to the communities we live in.

 We need to ask ourselves and we need to act before it is too late. Let's be clear. As a planet we are using up our environmental capital far faster than we can replenish it. We must bring that equation into balance. That means we need to start changing behaviour. There is an old Chinese proverb that says if we continue down the road, which we appear to have chosen, there is a very real chance we will end up exactly where we are heading.

We need to change direction, and we need to change it now. 

* The author is a professor in the department of Commerce

 and Business Management, Guru Nanak Dev University, Amritsar