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Green taxation in the Global South: trends and opportunities

Revenue from non-renewable natural resources has been falling, reflecting declines in global commodity prices, while public revenues from other sources rose through 2016. Many countries undertook significant tax reforms during this period to raise resources, although the emphasis of reforms varied based on national circumstance. Countries that had large revenues from non-renewable natural resources, made up for falling revenue principally through strengthened direct taxation on personal and corporate incomes. The within-region disparities highlight the importance of national analysis of tax reform and structures and their impact on the SDGs, such as inequality and environmental risks.

According to the OECD, the pace of environmentally related tax reforms has slowed. Several countries have lowered their energy taxes or have weakened their commitment to better aligning energy taxation with climate costs, conflicting with environmental preservation objectives.

Broad based sustainable tax reforms shifting to pollution would serve multiple purposes. Increasing the amount of revenues raised through green taxation has the potential to reduce state dependence on aid and debt financing, and to facilitate the mobilisation of domestic resources for public services.
As green taxes are harder to evade than e.g. corporate or personal income taxes, they also have the potential to strengthen state accountability, improve tax morale and enhance fiscal governance while bringing us closer to the SDGs.

2021 saw a big step taken towards an unprecedented global agreement on tax reform. This fiscal consolidation can also be used as an occasion to rationalize the tax systems by revenue-neutral reforms to enhance its efficiency and remove distortions harmful to growth. This would imply shifting taxation away from labour towards consumption, property and environment, broadening tax bases and improving tax governance. Broadening also means looking at green beyond carbon, for instance the non-carbon range of measures. A greater use of environmental taxes, while being careful to mitigate possible negative distributional effects, could support revenues, and contribute to behavioural changes.

The objective of the event is to present two recent studies on environmental taxation in developing countries commissioned by the European Commission and the French government (option 1; and have Global South policy makers present best practices in implementing Green tax reforms in their countries option 2).