Question

You are required to write answer both parts (a) and (b) to this question as 2 separate essays a) Discuss the problems of implementing environmental taxes in the UK, and would be beneficial. 20 marks b) Discuss whether you consider Adam Smith's canons of taxation still have relevance now; as part of your discussion, draw on a current UK environmental tax of your choice, and appraise it with reference to Smith's

Answer 1

a)The environmental taxes in UK has proven to be an negative impact on the environment. These taxes are so designed so as to promote a positive trends towards environmental behavior, to reduce the effects which is damaging the environment and inculcating a barrier to generate revenue that can potentially be used to promote further environmental protection. As per 2017 report environmental taxes has been raised to £48.9 billion in revenue. Revenue collected from the taxes has remained relatively stable over the last 20 years at between 2.2% and 2.8% of gross domestic product (GDP). As environmental taxes is based on energy, transport, pollution and resources. Both pollution and resource taxes includes the taxes based on waste of extraction of raw materials which in accounts only 3% of total environmental tax revenue which was collected in the year 2017. Rest taxes were from energy taxes which comes to almost 74% of all revenue. The energy taxes include taxes on the production and use of energy products like petrol, diesel, gas and electricity. The largest for environmental taxes was fuel duty which covers taxes on petrol and diesel fuels. Over the last 20 years , the number of petrol-driven cars in great Britain has fallen by 10% due to reduced Vehicle Registration Tax for all cars with low carbon dioxide (CO2) emissions and a tax cut on diesel fuel duty in 2001, encouraged motorists to trade in their petrol cars for diesel vehicles, which tend to produce less CO2.

Fuel duty rates were recently pledged by the UK Prime Minister to be frozen for the ninth year in a row. The UK government is currently considering response to its consultation to keep environment a clean policy, which examines how air pollution by not just CO2 but other air pollutants such as nitrogen oxides and particulate matter can be reduced. Future changes to environmental taxes might start to discourage the use of both petrol and diesel cars and encourage the use of alternatives, such as electric. And secondly the amount of municipal waste sent to landfill in the UK has also decreased. Revenue from this tax made the largest contribution to pollution and resource tax revenue in 2017, generating £0.9 billion in revenue, that is, 69% of all income from pollution and resource taxes. However, revenue from this tax has fallen as a proportion of gross domestic product (GDP) from a high of 0.07% in 2010 to 0.04% in 2017, due to biodegradable municipal waste sent to landfill decreasing.

Though not a tax, with retailers instead expected but not required to donate proceeds to good causes, this policy measure has had a clear impact on consumer behaviour across the UK.

According the me the ‘Hypothecation’, of environmental taxes based on carbon pricing revenues is unlikely to be a good idea in the long run, as there is always an uncertainty on spending . The government will have to continuously need to assess what need to do to generate revenues. They should consider: (1) Policies to be clearly based on the impact of carbon pricing on green house gases. (2) The government should take measures that any adverse effects of carbon pricing. (3) There should be an platform wherein to improve the function of tax-benefit systems. (4) Fiscal deficits shouled be reduced. and (5) spending on non-environmental social objectives. Hypothecation will also help in encouraging public acceptance of environmental taxes instead of spending priorities which is determined by the money is raised i.e new tax increases with spending commitments.

b) Tax is the major source of Government revenue. Previously there where no proper implementation of tax. The government thought that they should collect minimum revenue from tax. The tax should be collected according to income cycles. But economist like Adam smith we should follow his canons of taxation for efficient economic administration. Every person should pay tax according to his ability which implies that taxing the people on the rate of taxation. The individual has to pay depending on his certainity so to enable he or she to manage his income and expenditure. So, that government can also be benefitted from the same. It should be convenient to the tax payer. In the words of Adam Smith-“Every tax ought to be contrived as both to take out and keep out of pockets of the people as little as possible over and above what it brings, into the public treasury of the State”. The tax system should have a capacity to respond quickly to the changes in demand for revenue. It should safeguard the tax payer against the exploitation of tax authorities and experts It would also reduce the chance of tax evasion. If the tax is complicated, it will harass the tax payer and instigate him to evade tax. It would also add to legal complications. An unjust tax will always face sharp unwillingness on the part of the tax payers to pay and they will try to evade them, Every new tax must have a justification to create a feeling of acceptance in the mind of the tax-payers. The- above cannons of taxation should be taken into consideration by the Government while considering the levy of. fax. The Government should see that its taxation policy satisfies most of the canons of taxation.