Environmental tax debate lost in political storm

Sunday, 10 March 2019, 2:40 pm
Article: NZ Energy and Environment Business Week

Environmental tax debate lost in political storm

Originally published in Energy and Environment on March 7

The Government’s seemingly naive belief the release of the Tax Working Group’s report would spark a reasoned debate on tax reform has been dashed, greatly reducing the political opportunity for the expansion of environmental taxes.

Ministers have taken the position the report is a series of options all of which should be considered, while they discuss the way forward. It may be a reasonable position, but the lack of decisions has created a vacuum which has been filled by criticism and a lot of negative reaction.

While much of the political and media focus has been on the potential impacts of a comprehensive capital gains tax, there has been a similar problem with the less public issue of environmental taxes.

National MPs have been working hard in the provinces telling farmers to fear the combined effect of taxes on water, fertiliser, nitrates and agricultural emissions, as well as an environmental footprint tax and a natural capital enhancement tax.

National is right in the sense that all these are mentioned conceptually in the Working Group’s report, but not even they suggest implementing them all.

Prime Minister Jacinda Ardern said in Parliament “It would be good to have a rational discussion about the Tax Working Group's recommendations—all of which, in the environmental section, ask us to consider the entirety of what's happening in the environmental space without the scaremongering that is coming from that side of the House, and the inaccuracy from that side of the House”.

The political problem for Ardern is that as the Government are discussing what to do with the report, they are not ruling anything out - except for saying not all the report’s recommendations and suggestions will be implemented. This left Ardern saying “when we have a response, we will share it”.

What the Working Group did say was environmental and resource taxes are not widely or well used in NZ and there is significant scope for the tax system to play a greater role in enhancing the environment by levying those activities which cause harm.

In the short term, the Group recommends the immediate priorities should be to expand the coverage and rate of the Waste Disposal Levy, strengthening the Emissions Trading Scheme and advancing the use of congestion charging.

In the medium term, environmental tax revenue should be used to help fund a transition to a more sustainable economy. In the longer term, environmental taxes could become a much more significant part of the tax base.

These medium and longer term goals are ambitious and will have wide implications, but NZ is nowhere near there yet.
This story originally published at https://energyandenvironment.net.nz/home.html. A subscriber only service covering the energy and environment sector.

© Scoop Media