GREEN TAXATION: ITS IMPACT AND NECESSITY IN INDIA
Written Nida Jafri
“The only solution to pollution is a people’s humane revolution”- Bobby Seale
In the contemporary world, the idea of sustainable development is relatively young and continually changing. Federal governments all over the world appear to have woken up to fight for this cause as public knowledge of the seriously detrimental effects of environmental pollution and the ensuing climate change has increased. As pollution levels rise and the environment deteriorates, there has recently been a growing interest in implementing governance measures for sustainable development. These rules are being adopted in order to strictly enforce them and to apply them to businesses that release pollutants and are unfriendly to the environment. Countries all over the world are attempting to implement a Green Revolution in their taxation systems as a complement to this. More and more governments are turning to taxes to help them meet their environmental goals. Today, many nations provide tax breaks to encourage “green” activity and levy particular fees, penalties, or environmental and energy taxes to deter bad behaviour and generate income. One type of economic tool to solve environmental issues is “green taxes”. By increasing the cost of ecologically harmful activities and encouraging the adoption of greener alternatives, these levies seek to promote environmentally favourable behaviour.
WHAT IS GREEN TAX?
Green taxes, often known as “environmental taxes,” “pollution taxes,” or “eco taxes,” are excise taxes imposed on products that emit pollutants into the environment or on environmental pollutants themselves. “Green taxes” are intended to enhance the environment, lessen environmental harm, or foster an environment that is environmentally sustainable. It is generally accepted that “green taxes” will lessen environmental harm in the most affordable way possible through promoting behavioural changes among businesses, organizations, communities, homes, and individuals. Polluters are strongly encouraged by pollution taxes to cut their emissions and look for more environmentally friendly and sustainable options.
Also Read: Pigouvian Taxes: The Carbon Tax
Thus, a tax known as the green taxes especially in emerging nations like India, where tougher compliance of environmental protection norms is essential, it must be implemented and made popular. The implementation of the Green Tax is primarily intended to closely monitor and regulate the production and usage of goods and services that are not environmentally friendly so that their adverse effects can be mitigated. The government forces businesses and individuals to internalize the damaging effects that their actions may have on the environment by charging them approximately the same amount as the value of the damage caused by the externality under the Green Tax regime. The implementation of a green tax will undoubtedly secure environmental and economic efficiency and stability as well as address difficulties with waste management, water pollution, and air pollution. It is also undeniable that such measure has their own drawbacks. Various socio-economic barriers like increased prices of goods, political considerations, improper and unfair utilization of revenue generated often create major obstacles for such tax reforms.
Consumers and businesspeople may now clearly comprehend the environmental impact that their operations have on the environment. Green taxes also assist them in making decisions about how to stop such behaviours and create the equipment needed to produce goods with lower environmental impact. Additionally, users are urged to spend money on or use environmentally friendly products. In order to comply with the environmentalist agenda, the existing tax structure must be modified, and new taxes of a financial, environmental, or mixed nature must be introduced.
THE GREEN TAX SCENARIO IN INDIA
The idea of an environmental tax has gone through several stages in India. The idea may have been well welcomed, but more people need to be exposed to it and its influence needs to be stronger. People need to be educated about how they can safeguard the environment, even at the most basic levels, including limiting open burning of non-biodegradable rubbish. Because of this, teaching the public about environmental (green) taxes will help them better comprehend the effects of their activities and enable them to support sustainable development by paying environmental taxes.
The thirteenth finance commission in India made a compelling case for the imposition of a non-negotiable excise on all products that contribute to environmental pollution. This is undoubtedly a difficult process that requires a significant amount of study to be evaluated. However, no final decision was made on the imposition of a green tax on natural gas. The commission also proposed three particular grants for the promotion and conservation of the environment with the goals of boosting the forest cover, improving water resource management, and encouraging the connectivity of renewable resources to the grid for the country’s electricity. It does provide a reassuring image of the future and shows that India is prepared to rank among countries that practice environmental responsibility. The right to a clean environment, which is a fundamental component of the Indian Constitution under article 21 and is related to public health, can be related to pollution even though the word pollution does not appear in the Indian constitution. Both are listed in the state list and the VIIth schedule. According to Article 249 of the Indian Constitution, pollution control legislation is passed in the interest of the nation. To determine their impact on the ongoing growth and escalation effect over indirect taxes, the effective tax rates for specific harmful items and sectors were also evaluated.
In addition to the aforementioned actions, it can be observed that the tax reform committees of 1992 recommended imposing higher rates of taxes on a select group of raw materials in order to encourage economy in their use during both production and consumption, thereby preserving and protecting the environment. Additionally, it was suggested that excise taxes would be a good tool for addressing externalities in the form of social costs. However, no subsequent execution of this idea was able to get considerable notice. As a result, the taxation scheme in this area has been restricted to periodic state government incentives and discounts for employing more environmentally friendly and pollution-controlling technology and in the adoption of a well-established policy for the inspiration of Renewable Energy Technologies.
The Environmental Protection Act of 1986, the Water Act, the Air Act, and other environmental protection laws do not reference the imposition of a price on the use of an environmentally dangerous product anywhere, but instead, forbid or restrict its use by establishing a low threshold. The local and state governments are only seldom given some independence. Due to this independence, the government is able to implement policies that charge the use of old cars, the emission of dangerous substances by businesses, etc. Therefore, when India is compared to other nations, there is a significant gap in fiscal reforms, which means that even if certain dangerous products are produced, consumer and corporate behaviour is unaffected.
Therefore, it should be quite obvious that there is a significant global outcry regarding climate change and environmental damage, and that after ratifying and enacting green taxes, it is vital to translate numerous treaties and conventions into committed activities. Because every country has a completely unique mix of socioeconomic and political circumstances, different countries may have distinct carbon taxes. With this in mind, one could argue that a global environmental taxation scheme may not be the best option. However, under the WTO’s proposals, a cross-border tax adjustment may be done lawfully to resolve conflicts. Despite the fact that it is a challenging and complicated endeavour if countries step forward and show political determination. The corporate social responsibilities (CSR) for various sectors, Industries which are major pollutant contributors may also be considered as CSR will not only bring a reduction in hazardous emissions but will also create more opportunities for financial gains for the big giants in the form of tax incentive mechanism and ethical rationales of saving the planet for the sake of humanity. This approach offers scope for attaining the dual objectives of conserving the environment as well as earning a means against the environmental tax.
SUGGESTED CHANGE IN GREEN TAXATION IN INDIA
Green taxes should be applied consistently to all taxpayers to create a cost-effective system, as differentiating tax rates will stifle market competition, weaken incentives, and render the system insufficient to lessen environmental impact. Industrial exemptions from these taxes are only permitted for a short time, but they must be carefully targeted and constantly assessed in order to provide the businesses ample time to make long-term structural adjustments and ensure environmental effectiveness. Additionally, it’s crucial to evaluate a tax’s actual effects, thus continuous policy monitoring is required to make sure it’s environmentally friendly, provided that the market has adapted to the current rates.
One of the best ways to align product and service costs with societal ideologies about environmental conservation is through environmental taxes. It is a tool for raising consumer and business understanding of environmental issues and ensuring that industrialization and technical progress do not trump our fundamental obligation to preserve a sustainable environment. The success of an environmental tax, however, depends on a number of factors, including who should pay what and the situation in which the tax is applied. It comprises and implies the type, nature, and relationship of the environmental problem to other environmental issues, interactions with other policy tools, such as laws or regulations, that target the same issue as the tax under consideration, or for a different purpose altogether also play an essential role and should be in the same wavelength with each other.
The fundamental difficulty is ensuring a fair distribution of the burden while minimizing the societal costs of any inefficiencies in the policy aims and their instruments. As a result, a thorough analysis of the policy environment is necessary for the effective development and use of environmental taxes. In conclusion, it can be argued that although if India’s environmental taxation system has had some success in promoting sustainable development, a Green Tax system needs to be widely adopted in order to stay up with international requirements for environmental preservation. The impact of environmental taxation in India should be made widespread and well-known, if only for the benefit of humanity.
1) www.researchgate.net research paper on Green Taxation by Arjun Pal, May 2020.
2) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2049504 Green Tax and effectuation in India.
3) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3538691 A study on Green Taxation and its impact on economic development, accessed on 10 th March 2020.
4) https://link.springer.com/chapter/10.1007/978-981-16-3037-8_3 Environmental Regulations in India
5) http://www.nlujodhpur.ac.in/uploads/4(2)%20NLUJ%20LR%201%20(2017).pdf Environment Taxation In India Need for green fiscal reforms for a sustainable future.