The costs of climate disruption and pollution are now becoming clearer as they are constantly passed on to society, individuals and future generations, rather than absorbed by the polluter. Therefore, there is a dire need to shift the tax burden towards pollution and resource use, in order to help achieve Sustainable Development Goals (SDGs), inclusive growth and circular economy.
Experts stated this during a roundtable discussion titled “Tax as a force for good: Rebalancing our tax systems to support a global economy fit for the future,” jointly organised by Sustainable Development Policy Institute (SDPI) and Association of Chartered Certified Accountants (ACCA) on Thursday held in Islamabad.
Former parliamentary secretary for climate change Romina Khurshid Alam said that the proposal of taxing pollution and natural resource use and consumption should be considered by the incumbent government, as Pakistan is the country most vulnerable to the impact of climate change and environmental degradation. While acknowledging the existing burden of taxes on the industries, she urged the government to revisit the taxation regime and rationalise the tax system.
SDPI Executive Director Dr Abid Qaiyum Suleri said growth can only be effective when it is environmentally sustainable. Considering the challenges of environmental degradation, population explosion and growing unemployment that societies are facing today, it is time to explore rebalancing our tax systems and use tax as a force for good, he added.
Shifting the tax burden from labour to natural resource use, pollution and consumption could help achieve the Sustainable Development Goals (SDGs) and an inclusive and circular economy, he remarked.
He suggested that a mechanism should be developed in our tax system where polluters pay more taxes and there are more incentives provided for those industries which are the least responsible for pollution and take care of the environment.
ACCA Regional Head of Policy Arif Masud Mirza said aligning our tax system with the circular economy and the SDGs would be a major challenge. He said there are more than a hundred ‘green tax’ options available to governments for applying the ‘polluter pays’ principle, including air pollution, energy, food production inputs, fossil fuels, metals and minerals, traffic, waste, and water etc.
We need radical thinking in radical times to put this ‘green tax’ on pollution, he added. He suggested the government to abolish fossil fuel subsidies and pricing carbon emissions. Also, tax revenues should be used to reduce taxes on labour and expand social protection, in particular addressing the needs of lower income households, he added.
SDPI Joint Executive Director Dr Vaqar Ahmed said that green taxes have the potential to resolve dirty fuel, natural resources and water use. However, imposition of such taxes will require capacity building of parliamentarians who will enact the law around these taxes.
Similarly, capacity building interventions will be required for civil services involved in tax administration, he added.
He added that the parliament, federal and provincial tax authorities and private sector will have to collectively decide whether green taxes should be levied at the federal, provincial or local level.
It is important that the private sector does not see green taxes as a loss of competitiveness, rather as an intervention which can promote circular economy and in turn help SDGs, he remarked. This will also help private enterprises to envision how they can transition to business models that contribute social and environmental value.
Published in The Express Tribune, March 8th, 2019.