Abstract
The Organization for Economic Cooperation and Development (OECD) defines environmental tax as a tax which has negative impact on the environmental distortion. It encompasses energy taxes, transport taxes, pollution taxes and resource taxes. Sarcastically, despite Japan being the third biggest economy, it lags environment tax which has direct negative environmental impact. The taxes in Japan are related to environmentally sustainable taxes, such as, fuel, automobile and automobile taxes.
Japan believes that environment tax should be designed revenue-neutral. Itbelieves that using revenue generated by the environment taxes, Japan can cut some of the existing taxes (e.g., income tax, corporate tax and social insurance premium), so that the introduction of environmental taxes do not add to the overall burden of tax payers.
In a country like India, given the diverse structures of industries and automobiles following loosely the gas emission norms, a debate is warranted whether India is in a position to give preference to market-based economic instruments over the regulatory instruments to abate the environment pollution. Free economy signifies the adoption of market-based economic instruments. But, in a country like India, which is an emerging economy and where small and medium enterprises (SMEs) are playing a lead role, market-based instruments alone may not be propitious to achieve the real goal. The factor hindering is high environmental abatement cost. Market-oriented instruments apply where taxes and subsidies are set in such a way that the marginal benefit equals marginal abatement cost.
The book consists of six chapters and appendices. Each chapter is independent in focusing the need for environment tax, with an eye on international experiences and its applicability in the Indian context. India is on the way to introduce goods and services tax (GST) regime from April 2016. Authors’ suggestions for inducting notified pollutant goods and services in GST should attract readers’ attention, given the Japan’s recommendation for designing the environmental tax revenue-neutral. The chapter on ‘Role of Environmental Subsidies in India’ makes a special attraction as it would likely stir up political firestorm with the revelation that subsidies encourage environment problem. The present government is already engulfed by criticisms over the downsizing of subsidies, in contrast to previous government binging on subsidy-run economy.
The observation made in the book on the choices between market-based instruments and regulatory instruments was well suggestive. But, how far the choices are exclusively adaptable, particularly for the most pollutant SMEs, such as, hazardous chemicals manufacturing like dyes and intermediates, textiles and E-waste, is a matter of debate. Given the financial fragileness of SMEs, the authors’ advices that they are not exclusive and can be used to complement each other are notable.
The book’s revelation of seven states accounting for 70 per cent pollution is a message for Greenfield projects targeted in these states. India is heading for a new era of manufacturing, where the present government dreams to make India a manufacturing hub in the world. A new model of manufacturing practices invoking information technology (IT) and regeneration of consumption pattern through digitization will drive the country into a new phase of industrialization. In this transition, the traditional industries (such as, textiles, hazardous chemical, leather and others), which are responsible for the generation of dense pollution, are likely to be phased out in due course. Accordingly, the generation of environment pollution will change the track and will warrant for new countermeasures. In this perspective, the combination of regulatory and market instruments will be essential to frame the fiscal policy to nip the environment pollution.
The chapters on environment taxes in South Africa, China and Mexico will provide the guidance for the policymakers in India.
However, some case studies would have added a value to the suggestive measures for fiscal measures for clean environment.