Vary tax depending on enviro impact?
Interesting that in EU they are considering varying VAT based on the environmental impact of a product. Brown and Sarkozy put the proposal forward. When I suggested that we should tweak the tax system in order to advance social or environmental goals (in that case ringfence losses from investment properties to take some of the speculative heat out of the housing market) John Shewan from PWC said on Nat Radio I was behaving like Muldoon. So what’s so radical about using the tax system to achieve enviro goals? Why shouldn’t cars with lower emissions have lower taxes?
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August 14th, 2007 at 2:47 am
Russell asked “Why shouldn’t cars with lower emissions have lower taxes?”
In three ways this is already happening:
1) to the extent that cars with better fuel economy have lower emmissions they are already being rewarded with lower fuel taxes per km travelled
2) the further you drive your car the more pollution it emits and the more you pay in fuel taxes and RUCs
3) to the extent that small cars are cheaper and emit less emmissions than big cars the smaller amount of GST is a reward.
Is GST charged on JUCs? If not then that is where the tax system is rewarding the biggest polluters, assuming that olders cars are driven the same annual distances as new cars. However US DOT research presented in their CAFE reviews reveals significantly lower mileage for older vehicles, particularly those more than 10 years old.
August 14th, 2007 at 11:45 pm
There is an important difference between lower taxes and lower tax rates. Using differential taxes to encourage or discourage behaviour is perfectly sensible economics.
In the UK, cars with lower emissions and smaller engines pay lower registration charges. That would be easy to do here as well.
Interesting, Russel, that you were criticised by John Shewan. He has been accepted by the media as an independent expert commentator, yet his views often sound more like National Party policy than a balanced view of the system. He is a tax accountant and lawyer not an economist, and I doubt he has ever read much ecological economics. Or for that matter former National Environment Minister Simon Upton’s views on economic instruments
August 15th, 2007 at 1:07 am
jgg, since the registration fee is only $45 plus ACC it probably wouldn’t provide a big enough incentive. How about an import tarriff based on the official EU, Oz or Japan compliance certification test results? That might make new small cars cheaper than big JUCs. It would also giver newer cleaner deisels a chance to compete with old smokeys B-).
August 15th, 2007 at 1:37 am
What you need then, Kev, is a progressive registration fee rather than an import tarriff. This would start at the $45 rate for the most efficient vehicles, and go upwards from there for the less efficient. This could be phased in over time, so that the SUV driver would be charged $100 the first year, $150 the second, etc… Better than a one-off import tarriff because the reg fee becomes progressively prohibitive for older, inefficient vehicles.
August 15th, 2007 at 1:42 am
Speaking of taxes, I’d say that someone needs to point out to the government that Kiwisaver provides massive incentives to the rich to save, and much less so to the poor.
For someone making $200,000 by 2011, the benefit per year will be:
4% tax free employer contribution: $8,000
plus $1,040 tax credit
for a total of $9,040
A person making $200,000 is usually in a much better position to be able to put aside a savings amount than a person at a lower income level.
Kiwisaver eligibility should be phased out above a reasonable set income level.
Kiwisaver could be used to promote environmental goals like reducing air pollution (heat pumps instead of wood burners) or putting solar heaters on houses. If people are given the option to take out money for these purposes–tax free and penalty free–Kiwisaver could do a lot of good.
I’m also in favour of providing people a lot more choice in where they can invest their Kiwisaver funds. Keeping Kiwisaver funds locked up in a bunch of New Zealand companies artificially inflates the local share prices and distorts the market. Kiwis should be able to invest in hundreds of different funds like American workers can with their IRAs.
I’m in favour of lowering the retirement age so people can take their money out at a younger age. I’m also in favour of allowing people to use Kiwisaver funds to pay back their children’s NZ student loans without penalty, if they so choose.
August 15th, 2007 at 3:03 am
alistair.
That’s a good suggestion. The only drawbacks are that annual mileage tends to fall as vehicles get older and price tends to fall so it tends to penalise the poor more than the rich.
I think we really need a clean slate approach like when RUCs were introduced. That went from quarterly, straight-line gross weight charging to km travelled, 3rd power axle weight charging.
Electronic tolling would allow all charges to be on a vkt basis, varied with time and location, and perhaps using a weighted average of the manufacturers compliance certification test results/WOF emmissions test and/or in-motion emmissions sensors on high volume roads. This would reward those who properly maintain their vehicles and minimise their driving, especially by eliminating short journeys that don’t let engines and cats get warmed-up and therefore have exteremly high emissions per km.
August 15th, 2007 at 9:03 pm
So what’s your position on some cars that are eco-friendly to run actually do more harm to the environment to produce? And if we cycle through car purchases quicker, what is the net cost to the environment, especially if older cars are not properly recycled?
The *radical thing* about using taxes to achieve environmental goals is that you pass all the complexity on to the businesses to monitor a complex tax system that is about trying to penalise certain behaviours rather than focus on raising revenue in a fair and equitable way to all citizens and businesses for the purposes of running a government.
For instance, as a small business of one person, I’m also an unpaid tax collector for the government. With the end of year period upon me, I needed to get figures from my accountant covering complex issues (for a small business) given that half my income comes from foreign sales. I managed to submit my GST return a few weeks late and was billed $130 by IRD. I collect the money, I pay an accountant to work out how much the government demands and then pay extra because I didn’t hand it over fast enough. Just wait until I’ve got to factor in how many shipping miles I’m supposed to factor in when I offset my credits and debits. Great. It will cost me probably $500 more of accounting fees to avoid the $500 penalty fees when I discover I’ve miscalculated.
August 15th, 2007 at 9:05 pm
andrewudstraw, good ideas. However, I was left wondering if there was actually any *saving for retirement* going on there somewhere, or is that beside the point?
August 15th, 2007 at 11:42 pm
Kiwisaver should be about more than just *saving for retirement*. In fact, it already is. There are provisions for taking money out for a first home purchase.
Once you say it is ok to take a large chunk of money out without penalty for a home purchase, it should be just as valid to say a heat pump or solar heating systems can be paid for out of Kiwisaver. Solar heating systems save a lot of energy and would reduce demand for electricity, taking pressure off power companies to use dirty power to meet demand. Heat pumps are the clean way to create household heat; they reduce air pollution.
Kiwisaver should be used as a tool to promote investments in tune with good public policies.
August 16th, 2007 at 3:10 am
Take the RUCs off light diesels altogether, the tax should be on the fuel for all vehicles other than those heavy enough to be damaging to the road network. Diesel could cost the same as petrol and those new European TDs would still be miles cheaper to run.
Stuff the tax breaks on fuel that farmers get. It’s simply not needed, and all the gear’s trucked around all over the place by contractors now anyway (wage-hour efficiency being their driving goal rather than any interest at all in fuel efficiency).
Clean up the fuel itself if you want better emissions standards, and cut the Kyoto rate proportionately off renewable fuels. Oh, right, we also need a carbon tax (also on coal, fertilisers, etc, etc), better rail funding, nationwide public transport goals for local authorities (less millions on stadiums, more millions on rail and bus), and so on.
$25/ton for Kyoto? It’s about 2.67kg(CO2)/L(diesel), AFAICT, which means it’s only ~7c/L, or 1c/L saving at 15% blend. You’d probably need ten times that in tax to make people take it seriously though.
August 16th, 2007 at 5:22 pm
Here’s MY solution to peak oil as it affects shipping:
http://tinyurl.com/2mqv4y
jh
August 18th, 2007 at 11:06 pm
Rather than applying complex tax rules, why not simply place severe import restrictions on certain vehicles, such as 4WDs, and only sell them to people whose occupations can justify owning them? And ban the things from near schools, they are a menace and threat to other kids lives.
OK … maybe I’m a bit biased because an **4#@^ in a 4WD wrote off my small car when he rammed me from behind at an intersection … I’m sure the guy was also on his cell phone at the same time, but I couldn’t prove it.
August 20th, 2007 at 7:49 am
Talking about taxing for environmental impact - isn’t it time the Bluff aluminium smelter was closed down. Maybe we wouldn’t need those giant pylons then. How much of the country’s electricity supply does it use. How much of it’s profits go offshore. . .
August 20th, 2007 at 10:57 am
Buzz
First: If you close down Al smelters that are running off hydro here, the demand for Al will mean someone else will supply that same Al using coal, to the marked detriment of the environment.
Second: If you pay attention to where the supply is and where the demand is the pylons are being planned to manage the demand imposed by the rapid growth of the city of Auckland. Tiwai Point is on the South Island, sensibly close to the hydroelectric supplies and distressingly, not only would the pylons have to be upgraded but supply of electricity from the South of the South Island to the city of Auckland would require (I strongly expect) upgrades of the cables between the two islands.
Third: If you want fuel efficient, lightweight and easily recycled vehicles, and bicycles you need Aluminium.
Some Green issues aren’t as obvious as others.
respectfully
BJ
August 21st, 2007 at 12:49 pm
pricing environmental degradation
Rednecks collective down here have called a special meeting, they been carried away and said they want
Jeanette Fitzsimons to receive the award Legion de Quixote. [LQ]
They say they read this line in her paper of 5th august.
“One wonders whether the dairy farmers and CPW have done their economic analysis on the basis that water will be free, pollution unregulated and greenhouse gas unpriced”
and also
“If you want tax cuts [ because of pricing environmental degradation ]
this is the way to get it”
Well apparently the CPW scheme down here is shagged and being strongly in favour of tax cuts, and always wanting to be on the winning side, I will make a decision about this shortly.
It won’t stop us sacking Kerry Burke though,