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What are Environmental Taxes?

[] What are Environmental Taxes?
[] Why do we need Environmental Taxes?
[] Do Environmental Taxes exist in Japan?
[] Introducing Environmental Taxes in Japan

[] What are Environmental Taxes?
According to the OECD, an environmental tax is a tax whose tax base is a physical unit (or a proxy of it) that has a proven specific negative impact on the environment. Four subsets of environmental taxes are distinguished: energy taxes, transport taxes, pollution taxes and resources taxes.

Environmental Taxes are a kind of economic instruments to address environmental problems. They are designed to internalize environmental costs and provide economic incentives for people and businesses to promote ecologically sustainable activities.

Carbon taxes are a kind of Environmental Taxes.

[] Why do we need Environmental Taxes?
Because environmental taxes provide incentives to lessen environmental burden and preserve the environment.

By internalizing the environmental costs, (for example, activities that burden the environment will be taxed, whereas activities that contribute to the preservation of the environment will get tax break), environmental taxes provide incentives for businesses and individuals to integrate environmental concerns into economic activities, and minimize negative environmental impacts.

Because revenues generated by environmental taxes can be used for other environmental preservation projects or to cut other taxes.

Tax revenues of environmental taxes can be used for environmental preservation or other non-environmental welfare. The revenues from environmental taxes can be used to cut taxes such as income tax, corporate tax and social insurance premium.

[] Do Environmental Taxes exist in Japan?
There are very few taxes in Japan that truly aim for environmental sustainability. The existing fuel, energy and automobile taxes in Japan are environmentally related taxes, rather than environmental taxes. These taxes are of environmental relevance, but are not levied directly based on the negative environmental impacts. Moreover, compared to many other developed countries, the environment-related taxes of Japan only account for a relatively small share of the total tax rates.

Japan needs environmental taxes to address environmental problems both environmentally effective and economically efficiently.

[]Introducing Environmental Taxes in Japan
To better utilize environmental taxes as a fiscal instrument to address environmental problems, we must implement a comprehensive green tax reform that entails introduction of new taxes as well as changes in the existing fiscal policies.

Environmental taxes should be revenue-neutral. Using revenues generated by the environmental taxes, we can cut some of the existing taxes (e.g. income tax, corporate tax, social insurance premiums, etc) so that the introduction of environmental taxes doesn’t add to the overall burden of taxpayers. In the long term, the double dividend will lead companies to better integrate environmental concerns into decision-making and eventually result in a structural change in the industries.

Phased in
Environmental tax rates should be phased in so businesses and households have time to adjust ways of production and consumption.

Click here to learn about the progress of the introducing carbon taxes in Japan and the positions of major players in the current debate


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