PR from Basque research:
Environmental fiscal reform would improve the environment and reduce the informal economy
The effect that the introduction of environmental fiscal reform would have on an economic system has been the focus of study since the 1990s. However, studies of this type have until now failed to take the informal economy into consideration; this is an activity which in the case of Spain, for example, could account for as much as 20-25% of GDP. The group of researchers of the UPV/EHU and the BC3 have addressed this subject and have concluded that environmental fiscal reform could help to cut the damage caused by the informal economy on the public system apart from the environmental benefit it would bring in its wake. The journal Energy Economics has published the online version of the work and will shortly be issuing a print version.
As different environmental problems have been emerging, many pieces of academic work have been produced to study the possibility of incorporating environmental fiscal reform and the effect this would have on the economy. Environmental fiscal reform is one of the possible channels for addressing environmental problems and basically consists of levying taxes on the activities associated with environmental problems, like CO2 emissions, and cutting other kinds of taxes. “Environmental taxes manage to get consumers and companies to pay for the damage sustained by society as a result of pollution. What is more, they can be very effective in some cases because they can succeed in bringing about changes in our habits or behaviour and thus lower pollution,” explained Mikel Gonzalez-Eguino, one of the researchers responsible for this study.
The raising of taxes by public bodies through the tax system usually finds itself undermined by the so-called informal economy, in other words, the economic activity that does not pay any tax, and which is “a significant, growing proportion in terms of GDP in many developed economies,” pointed out González-Eguino. In Spain and in other countries in the south of Europe it is reckoned to have a volume equivalent to 20-25% of GDP.
In the fiscal reform being proposed by this group of experts, the income produced by “green taxes” would be used to cut the taxes on labour to the same extent, since “in this work we didn’t want to get involved in the argument about what the optimum size of the public sector should be,” as González-Eguino carefully explained. With the reform we are just guaranteeing that the necessary money would be collected to maintain the existing public services but a greater burden would be placed on pollution and a lesser one on labour.”
The researchers used economic models to simulate how a reform of this nature would affect the wider Spanish economy. “We used a methodology known as computable general equilibrium which allows us to take all the economic sectors into consideration and in that way to analyse policies that affect the economy structurally. What is new is that we have included the informal economy, which previously conducted studies had not taken into consideration.”
The tax system would emerge strengthened
In the simulations made the researchers observed a greater benefit for the public system than they had expected. “When an environmental tax is introduced, the groups that do informal work start to pay taxes by the indirect channel of consumption. If tax on labour is reduced at the same time, a reduction in the inefficiency of the tax system and an effective cut in fiscal pressure are achieved. In other words, it produces an increase in economic activity, a cut in unemployment and a cut in the informal economy.”
As regards the possibility that the proposal made by this study could become reality, González-Eguino stressed that “this study reinforces the idea that environmental fiscal reform could be highly beneficial and would allow us to put figures on one of the recommendations that several international bodies have been making to us for a long time.” However, he does not ignore the limitations they have come across in the course of the study: “For example, the associated rise in energy prices could be counteracted by the increase in real wages, but for inactive people, pensioners and unemployed people especially, this effect would not exist. The possible regressive effects of these reforms on the more vulnerable groups, in particular, would have to be analysed, and mechanisms that would correct these effects, should any arise, would need to be included.”
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Markandya, A., González-Eguino, M., Escapa. 2013. (Forthcoming). From shadow to Green: linking environmental fiscal reforms and the informal economy. Energy Economics. 35.2.
http://www.sciencedirect.com/science/article/pii/S0140988313002090
It might work if it wre not for the claim that CAGW is “settled science’. But unless and until this clim is dropped the whole idea is a crock.
Can I translate this into plain English? What it says is:
We think we have figured out how to avail ourselves of tax revenue from prostitution, drugs, gambling and other illegal activity without admitting that we’re availing ourselves of tax revenue from prostitution, drugs, gambling and other illegal activity.
Fascists discover modelling, for justification!
Environmental taxes manage to get consumers and companies to pay for the damage sustained by society as a result of pollution. What is more, they can be very effective in some cases because they can succeed in bringing about changes in our habits or behaviour and thus lower pollution,”
http://youtu.be/LLCF7vPanrY
Right. Put a tax on CO2. Eventually some wise guy will remember humans emit CO2 and set a limit on how much CO2 an individual may release annually. Of course, that would extend to having kids and how many; have to get permission and all the forms signed and approved in quadruplicate. After all, Those Who Know Better (than us) consider humanity a blight on the earth. A tax on CO2 is the first step toward deindustrialization and depopulation.
Headline: “New tax scheme: ‘Environmental fiscal reform’”
Let me fix that: “New tax SCAM: ‘Environmental fiscal reform'”.
Accurate now.
Environmental taxes, like all taxes, can provide perverse incentives. For example attempts to tax household rubbish by requiring the use of special approved (expensive) taxed rubbish bags will result in some people simply dumping their household rubbish out of the back of the car in a nearby park at night. Are the models they are using realistic enough to capture these kinds of perverse effects? The highly abstract language they are using – speaking all the time about “environmental taxes” without being more specific – makes me doubt it.
I think we should put a tax on dumb unsubstantiated theories that are wasting 0.5% of world GDP every year.
Can we think of one? Global warming of course.
The last thing that should be done is to put a new tax on the efficient part of the economy which is creating jobs and give subsidies to the wasteful part of the economy which is raising unemployment.
The issue is that leftists and environmentalists do not understand how human civilization really works. They believe in unicorns and forcing ever more people to depend on government hand-outs.
Human beings have evolved to be productive and put food on the table and find better ways of doing things. Finding better ways of doing things means one has to understand what really works and what “better” means. Leftists and environmentalists don’t understand any of that. They think in terms of “feelings” rather than concrete results.
albertalad says:
December 27, 2013 at 12:23 pm
It’s the EU – they’re flat broke, borrowing from Germany, their windmill craze dumped tens of thousands on the unemployment lines, and the EU still doesn’t get the message – you’re flat broke! Period!
___________________________
I think you missed a couple of points there, albertalad.
The EU;
You’re flat broke! Period!
You are morally and ethically bankrupt;
You are smug, weak, self centred, impotent and politically impoverished.
You have become the ugly sister of democracy and good government.
Food for thought.
The idios has discovered that raising consumption taxes and lowering taxes on labour makes labour cheaper? Way to go.
“… we are just guaranteeing that the necessary money would be collected …”
A very telling phrase. They want our money, nothing more, nothing less.
Wow! Soon they will be taxed for breathing, plus a CO2 penalty for exhaling!
Eclectikus says:
December 27, 2013 at 1:57 pm
““their gigantic wind/solar projects have devastated their competitiveness and helped destroy their industrial sector.” Not exactly, the Spanish industry was destroyed during the 80s and 90s of last century. ”
you couldn’t even compete while devaluing the peseta?
But for two things. Humans are loath to being told how to live. And more important, if it works the well will run dry, then what will be taxed as “pollution”? I hate to list them for fear of triggering memories from WWII.
chris y says:
December 27, 2013 at 1:06 pm
“The proposal relies on this assumption- “A lower income tax would thus reduce informality”
In the real world, I think this assumption is BS.
The informal economy would thrive even if income taxes were reduced to zero, because the informal economy exists for many other reasons”
The informal economy always has the problem that it cannot openly seek customers and runs the risk of police raids. So when legal activity is no longer as disadvantaged by taxes as it is now some of the informal activities will become legal ones, the equilibrium shifts. Not all of it but some. The idios has that right.
The informal economy is the black market or the underground economy. The reason bureaucrats are concerned is because the underground economy represents over half the economic activity in the world according to one article I read. As taxes and regulations increase the underground economy grows.
One might even say the underground economy is the way disgruntled citizens give the politicians a vote of no confidence. (I am being polite) If politicians had their head screwed on correctly they would realize a large underground economy is the SYMPTIOM of a very sick country. New tax schemes are the LAST thing politicians should be looking at. Instead they should be taking a good hard look at the direction their country has been heading in and start cutting bureaucracy, repealing laws and cutting taxes because a large underground economy means you got a really bad system of government.
“The best laid schemes of mice and men…”
The problem is the “men” part. Most people in a position to make and implement those schemes have less scruples than you.
SAMURAI says: @ur momisugly December 27, 2013 at 1:05 pm
….Statists will destroy the world economy with their foolishness.
>>>>>>>>>>>>>>>>>>>>>>>
Unfortunately that is their plan. As the Fabian window now installed at the London School of Economics states across the top.
Beneath the line “Remould it nearer to the heart’s desire”, the mural depicts Shaw and Webb striking the earth with hammers.
LSE is the school who has trained people like David Rockefeller, George Soros, John F. Kennedy and other world leaders.
DirkH (December 27, 2013 at 3:29 pm):
Several devaluations of Peseta were done many times, but for a country as Spain after forty years of dictatorship, with almost no oil, few and expensive coal deposits, with agriculture being controlled (and reduced) by the EU, few technological patents (or none), and an economy dependent largely on tourism… it wasn’t enough. And thirty years of social democracy, nuclear outage, chronic environmentalism, and some extra internal problems (basically nationalism and terrorism) didn’t help.
So studies like this, excreted directly from public institutions, are more a consequence than a symptom of the problem.
New Tax Scheme: Where have we heard that before?
http://fullcomment.nationalpost.com/2013/12/27/mark-milke-the-very-first-tax/
Great excerpt Gail Combs.
Government(s) that can classify CO2 (plant food) as a pollutant under bogus pretenses can in turn classify anything else as pollutants. I predict H2O vapor and CH4 similarly classified in the not so distant future.
The other thing that happened after the Crash of 2008 here in the US at least is a massive wave of new rules, regulations and other speed bumps to progress. It is not just the taxes that drive everyone underground, it is the rules, regs and fundamental lawlessness / corruption of the above ground economy.
Jack Anderson wrote in 1989 that fully 15% of the GDP of the old Soviet Union was black market when it fell. Some speculate it was much higher than that.
http://news.google.com/newspapers?nid=1891&dat=19891001&id=OWgfAAAAIBAJ&sjid=59QEAAAAIBAJ&pg=4271,298886
What these clowns don’t understand is that the more intrusive they get, the larger they grow the underground economy. Or worse, perhaps they understand precisely so as to turn us all into criminals so we are easier to govern. Cheers –
Are we “fundamentally restructured” yet? Apparently so.
“R. de Haan says:
December 27, 2013 at 12:35 pm
Zeke says:
December 27, 2013 at 12:05 pm “When anyone refers to the informal economy, I believe this is a way of talking about the private wealth in a country”.
No it isn’t. It is the underground economy, the money made with illegal activities and all work.performed without paying taxes. Black money. In this case the informal economy (ending the informal economy) is used as an argument to get this legislation introduced.”
Thank you for your correction, R. deHaan, which I believe could be absolutely correct. However, the “informal economy” is not defined in anything I was able to access. This phrase may have a lot of degrees of freedom in it. For example, it could mean the economy which is based on sales on the world wide web, such as ebay. Or it may even be applied to selling eggs or milk, or having a garage sale, or buying things in second hand stores. The “informal economy” is not defined, and to my reading of the available excerpts it is regulated on this basis: “Environmental taxes manage to get consumers and companies to pay for the damage sustained by society as a result of pollution. What is more, they can be very effective in some cases because they can succeed in bringing about changes in our habits or behaviour and thus lower pollution…”
I do not see this as reflecting a restricted definition for “informal economy.” I see it as all encompassing. That is why I ventured, “I do not think it precludes the idea that this is a tax on all wealth, any assets in existence and any transaction.” If there is a definition of “informal economy” in the article, and someone can see the correct graphs or read the paper, then that would help with terms.
The “experts” shy away from seeking the causes for the “informal economy”. The primary cause is that people NEED defensible income, money that they KNOW belongs to them, to do with as they please. If tax systems allowed even a small amount of defensible income there would be no informal economy. The notion of defensible income derives from defensible space, a major factor in public housing, explaining the failure of projects that do not provide it.
Any study that purports to understand the informal, or black economy, with no reference to its cause is a total crock, as is this study.