Transcript Tax Relief for energy-intensive business in the framework of the

Tax Relief for energy-intensive
business in the framework of
the ecological tax reform and
the climate change levy
Michael Kohlhaas
Presented at
Ort, Datum
ECOTAXES IN GERMANY AND THE UNITED
Autor
KINGDOM - A BUSINESS VIEW
Berlin, 25 June 2004
Outline
•
•
•
•
•
•
•
M. Kohlhaas
09.04.2016
Ecological Tax Reform in Germany
What are special provisions / tax concessions?
Motives for tax concessions
Criteria and constraints for special provisions
Design of special provisions
Tax concessions in Germany and the UK
Perspectives for Germany
Ecological tax reform in
Germany
– Revenue-neutral tax reform
– 5 steps between 1999 and 2003
– Energy taxation
•
•
•
•
Increase of taxes on petroleum products
New tax on electricity
Special provisions for energy-intensive production
Additional revenue about € 18.6 milliard (billion)
– Revenue recycling
• Reduction of social security contributions
M. Kohlhaas
09.04.2016
What are special provisions?
– Economic theory: uniform taxes induce
efficient reduction of energy use or emissions
– Special provisions: deviations from a uniform
taxation
– Tax differentiation between
• energy carriers
• users and
• usage
M. Kohlhaas
09.04.2016
Motives for special provisions
Fear of adverse effects of taxes
– Economic Effects
•
•
•
•
International competitiveness
Premature retirement of capital (physical, human)
Distributive effects
Principle of “protection of confidence”
– Environmental Effects
•
Carbon leakage: reduction of emissions in one country may be (partially
or (over-)compensated by increase of emissions in other countries
 Political acceptance
M. Kohlhaas
09.04.2016
Criteria and constraints for
special provisions
–
–
–
–
–
–
–
M. Kohlhaas
09.04.2016
Avoid negative economic effects
Avoid carbon leakage
Preserve incentive effect of eco-tax
Legal constraints (national, European, international)
Administrative constraints
Market-based instrument, not discretionary
Conflicting objectives: weighting necessary
Demarcation of beneficiaries
– The more precise the demarcation of the
beneficiaries, the smaller will be the loss of
incentive to reduce emissions and the loss of tax
revenue.
– However, the necessary administrative procedures
would be very complicated, be subject to
substantial uncertainties and require ample scope
of discretion.
 Discretionary special provisions should be kept to
a minimum if the idea of environmental taxes as a
market-oriented instrument is taken seriously.
M. Kohlhaas
09.04.2016
Special provisions in Germany
– Do not apply to road fuels
– Broad and rules-based system:
• Tax rates differentiated by energy carriers
• Reduced rates for broad-based categories
• Firm-specific tax rebates
M. Kohlhaas
09.04.2016
Tax rates (Euro per ton CO2)
Coal
Heavy fuel oil
Heating oil
Natural gas
tax rate before April '99
Tax increase 1999 to 2003
Electricity 1)
Diesel fuel
Gasoline, unleaded
0
50
100
150
Euro per ton CO2
1)
M. Kohlhaas
09.04.2016
Average CO2 emissions (0.56 kg per kWh)
200
250
300
Germany 1
(draft law - not implemented)
– Reduced tax rates of 25% for all producers
of the goods and materials sectors
– Tax exemption for producers which belong
to an “energy-intensive” sector (energyintensity > 2%
– Criticism:
M. Kohlhaas
09.04.2016
• energy intensity inappropriate indicator
• statistical categories imply unequal treatment
• reduction of net tax burden for energy-intensive activities
(perverse incentive effect)
Germany 2 (1999 - 2002)
– Reduced tax rates of 20% (of the regular
rates) for all producers of the goods and
materials sectors
– Individual compensation for all tax
payments exceeding reduction of pension
contributions by more than 20% (tax cap)
M. Kohlhaas
09.04.2016
Germany 2: Criticism
– No perverse incentive effect
– Individual firm data and not statistical
categories important for tax rebates
– Restriction to goods and materials sectors
may imply unequal treatment
– No incentive to improve energy efficiency
for energy-intensive enterprises
M. Kohlhaas
09.04.2016
Germany 3
– Reduced tax rates of 60% for all producers
of the goods and materials sectors
– Tax rebates of all 95% of tax payments
exceeding the reduction of pension
contributions (effective marginal tax rate:
3% of regular rate)
M. Kohlhaas
09.04.2016
Germany 2 and 3: Comparison
– Incentive effect is higher for some enterprises,
but lower for others: net effect ambiguous
– Average tax burden is higher for most
enterprises: positive revenue effect
– Danger: revenue raising may dominate
environmental objectives
M. Kohlhaas
09.04.2016
Climate Change Levy
– Non-domestic users only
– Taxable commodities
•
•
•
•
•
Electricity
Natural gas
Coal and lignite
Coke, semi-coke and petroleum coke
LPG
– Not taxable commodities
•
•
•
•
M. Kohlhaas
09.04.2016
Oil, gas oil, kerosene (subject to excise duties)
Road fuel gas (subject to fuel price escalator)
Heat
Steam
Special provisions in UK
– Tax exemptions
• Energy supplied in small quantities
• Electricity used in electrolysis processes
- primary aluminum smelting
- chlor-alkali processes
• Others:
- Electricity from “new” renewables
- good quality CHP
– Tax reductions: -80%
• Energy-intensive sectors (as defined in PPC Regulations)
• that are covered by Climate Change Agreements
M. Kohlhaas
09.04.2016
Some stylised differences
Germany
– Broad rules-based system with little scope
and need for discretionary decisions
– Weak incentive effect in industry
UK
– CCL integrated with CCA and ET from the
beginning
M. Kohlhaas
09.04.2016
Perspectives for Germany
– Review for ETR in 2004
– Should Germany continue ETR?
• Emissions trading only partial
• Tax revenue and labour costs
– Exemptions for ET sector?
• Reduction of social security contributions
• Emission certificates issued for free
 Issue does not “go away”
M. Kohlhaas
09.04.2016