MADRIDThe ecological transition must be accompanied by green taxes, that is, the implementation of new tax figures that help not only to conserve the environment, but also to reduce pollution and, therefore, the consumption of fossil fuels. or non-reusable products. Examples are taxes on plastic, waste or fuel. But various agencies have warned that the design of these tributes could end up impacting the humblest population and that they would therefore become regressive taxes.
Environmental taxes are, in the eyes of the European Union, those in which their tax base is applied to a product that has a negative impact on the environment. According to the National Statistics Institute (INE), environmental taxes accounted for 7.7% of tax revenues in 2020 in Spain, two tenths less than the previous year (2020 was the year of the more severe confinements). The concern, however, is that a boost from these taxes will affect families with fewer resources, which the Bank of Spain assumes will happen.
There are well-known cases: the least polluting vehicles are, at the same time, the most unaffordable, or the fact of living in an old or unrehabilitated house means that the consumption of heating or light is higher. All of these are elements that put more effort into the poorest households. The fact that the consumption of certain products is concentrated on the poorest population, as is the case with petrol, “adds more fuel to the fire”, exemplifies the professor of economics at the University of Barcelona (UB), Alejandro Esteller, at ARA. “It’s not that it’s a bad regression in the sense that the tax is poorly designed, but it has an unwanted effect,” Esteller says.
To address this, some experts point to the need to enable policies to offset this clash with transfers or subsidies. The Bank of Spain proposes that the lowest incomes be compensated for their sacrifices through targeted, temporary and income-conditioned aid. Esteller cites the electric social bond as an example. However, the EU’s premise must be taken into account: “The more you pollute, the more you pay”. But is that true? Transport and Environment points out that while CO₂ emissions from private jets in Europe increased by almost 30% between 2005 and 2019, they are shy away from paying for these emissions because no kerosene tax is applied. In addition, environmental organizations are calling for income levels to be taken into account when applying for taxes and for taxes not to fall solely on households, but rather on more polluting businesses or activities. In fact, the tax reform of the committee of experts demanded that part of this collection be used to compensate those who lose the most.
Spain, in the tail of Europe
Last year, Spain vaguely explained in Brussels that it intended to approve new environmental taxes, according to the Stability Plan sent to the European Commission. A proposal that reappears again this year. The state, in fact, is at the tail end of Europe in terms of green taxation. According to the latest Eurostat data for 2019, while the average income of the European Union for environmental taxes stood at 2.4% of GDP, in Spain the figure drops to 1.8%. According to the same survey, it is the fifth country in the EU to collect the least in environmental taxes. Faced with this, the commitment of the government of Pedro Sánchez is to triple environmental taxation to reach 5% of GDP by 2050, according to the report Spain 2050.
This is the starting point that has led organizations such as the Bank of Spain (BdE) or the International Monetary Fund to call for more green taxes to drive the ecological transition and tackle climate change, “one of the main challenges for society “, assumes the BdE in theAnnual report 2021. These types of tax figures “do not have a purpose such as personal income tax or VAT, ie collection, but seek to correct a situation in which the consumer does not take into account the damage it is causing a certain consumption on society “, explains Esteller.
And doing nothing is not an option, all organisms agree. In fact, according to estimates by the Bank of Spain, if current policies continue to be implemented, global economic losses would be “irreparable”. At the same time, “the risks associated with global warming may affect the most vulnerable households and businesses more severely,” warns the BoE.