LIMITATIONS OF SCOPE

There are certain payments to the government that relate closely to the environment, but are not within scope of an environmental tax. To be classified as an environmental tax, it must:

• be considered a tax according to the definitions of the SNA, and
• have the appropriate tax base according to the definitions of the SEEA.

In particular, neither the name used to describe the payment nor the purposes for which the revenue raised may be used are relevant in determining whether it is an environmental tax.

Therefore, payments that are not based on a physical unit with a negative impact on the environment are not considered environmental taxes. These include local government rates (e.g. municipal rates), land taxes and stamp duties on transfer of land, rents on non-renewable natural resources (such as the Petroleum Resource Rent Tax (PRRT) and the Minerals Resource Rent Tax (MRRT)). The Goods and Services Tax (GST) is also excluded, but for different reasons as explained below.

The three taxes on land (the local government rates, the land tax and the stamp duties on transfer of land) are all levied on either the value of buildings, the value of unimproved land or its improved status (Henry review 2010). As the tax base is either a property or land itself there is no tax base with a proven negative impact on the environment.

Rents on non-renewable resources (such as fossil fuels like coal) exist where the proceeds from the sale of resources exceed the cost of exploration and extraction, including a required rate of return to compensate for factors of production (labour and capital). Examples include the PRRT and the MRRT which are profit based taxes. The tax base for these taxes is not the natural resource but on the sales, and therefore excluded from environmental taxes.

In 2010-11, combined, these taxes total just below $21billion(footnote 1) . If the tax base, i.e. the structure, of these taxes were to change in the future they would potentially fall under the definition of an environmental tax.

The third type of tax excluded from the concept of environmental taxes is the GST. The SEEA explains that in general the GST has no influence on the relative prices in the same way that other taxes on environmental tax bases do as many payers can receive a corresponding GST credit (SEEA 2012 para. 4.157). In an Australian context, GST is not levied on all goods and services. For example, basic food, health and medical care, education and charitable goods are GST free. As such they will influence the relative prices to a certain extent. However, few, if any, of these goods are considered as an environmental harmful physical entity and they would not influence the relative price for environmentally harmful goods or services and therefore excluded.

While non-deductible GST can be included on for example fuel duty paid, total GST is excluded in practice as it is not possible to separate out the environmental component of the GST.

These exclusions are also a matter of international convention. If they were to be included then world-wide comparisons would be difficult, especially with countries that do not have, for example, sub-soil assets or other minerals. It is possible to show these types of transfers separately, in conjunction with environmental taxes, as related tax revenues (such as in Table 2 later).

1 Land taxes, municipal rates, other taxes on immovable property and the PRRT according to ABS cat. no. 5506.0 and the ATO. <back

Previous Page

Next Page