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Background Notes

Environment taxes rose by 15% in 2023

Online ISSN: 2009-7956
CSO statistical publication, , 11am

Introduction

This release contains an analysis of environment taxes by category of tax and economic sector of the payer.

Data Sources

The starting point to compile data on environment taxes is the National Tax List prepared by the CSO for the National Accounts and submitted to Eurostat under the European System of Accounts transmission programme. A number of different data sources are used to allocate revenues to payer sectors. These include the CSO Business Energy Use Survey data, Air Emissions Accounts, and Supply-Use tables along with specific information about individual taxes.

Revisions

The Environment Taxes 2023 release shows revisions when compared with corresponding figures in the Environment Taxes 2022 release. There were revisions to the National Tax List data for a small number of environment taxes, as well as the introduction of three new energy taxes, as outlined below.

Revisions to the sector distribution of energy taxes arose due to the incorporation of Air Emissions Accounts data for NACE disaggregation of carbon taxes, Business Energy Use survey data for disaggregation of excise duty on hydrocarbon oils and the National Oil Reserves Agency (NORA) levy, and the introduction of EU Emissions Trading System (ETS) data on verified emissions and free allowances to distribute purchases of carbon credits.

The economic sector distribution of transport taxes was revised to include vehicle registration tax data received from Revenue, while there were minor revisions to the distribution of pollution and resources taxes as the most recent Supply and Use data was incorporated.

New Environment Taxes

Three new energy taxes were included in Environment Taxes 2023. These are the Cap on Market Revenues (Windfall Gains in the Energy Sector) tax, the Temporary Solidarity Contribution (Windfall Gains in the Energy Sector) tax, and the Energy Congestion Charge.

Definition

An environment tax is defined by Regulation (EU) 691/2011 as “a tax whose tax base is a physical unit (or a proxy of a physical unit) of something that has a proven, specific negative impact on the environment, and which is identified in ESA as a tax.”

Once a tax base has been included in the list of environment tax bases, any tax levied on that base is considered an environment tax, irrespective of the motivation behind it. A list of Environment tax bases was agreed by Eurostat, the EU Commission, the OECD and the IEA and has been periodically revised. Table 1 contains national level data for each environment tax.

Value Added Tax (VAT)

Environment taxes reported in this release do not have a VAT component as VAT is recorded separately in the National Tax List. The key reason VAT is excluded is because VAT is mainly levied on households but is deductible for business. Accordingly, its inclusion would distort the overall proportion of environment tax paid by households relative to other sectors of the economy, while not influencing relative prices of environmentally harmful activities in the same way that other economy wide taxes on environmental tax bases do.

Plastic Own Resource Levy

Plastic packaging is now subject to a new charge called the Plastic Own Resource (POR) levy. In 2022, for example, this amounted to €197 million. As this charge is levied directly on the Irish Government by the EU it is deemed a current transfer within the National Accounts. Accordingly, it is not a tax and therefore not included as an environment tax in this release.

Categories of Environment Taxes

Energy taxes

This category includes taxes on energy production and energy products, including taxes on fuels for transport and stationary purposes. By definition, carbon taxes are included as energy taxes rather than pollution taxes, largely to aid international comparability. In Ireland’s case, taxes on transport fuels make up the bulk of energy taxes.

Transport taxes

This category includes taxes related to the ownership and use of motor vehicles. In Ireland this mainly relates to Vehicle Registration Tax (VRT) and Motor tax.

Pollution taxes

This category includes taxes levied on emissions to air and water, management of solid waste and noise. Carbon taxes are not included in this category.

Resource taxes

Included are taxes linked to the extraction or use of natural resources. Taxes on land are generally not included, nor are taxes designed to capture the resource rent from the extraction of natural resources.

Taxpayer Breakdown

Taxpayers are classified by household and industry according to the NACE Rev. 2 classification - the European Union’s Statistical Classification of Economic Activity. The taxpayer is considered to be the unit using the tax base (e.g. user of electricity or transport fuel) or undertaking the activity being taxed (e.g. disposing of waste). This principle (often called the "polluter pays principle") holds regardless of where the tax is collected. While taxes on transport fuels are, for efficiency reasons, collected from mineral oil tax warehouses, the tax has been allocated to the unit purchasing the fuel for final use.

Methodology for Allocating Taxes to Taxpayers

The method used to allocate environment taxes to taxpayers varies depending on the tax in question, using Supply-Use tables in some instances and more detailed sources (e.g. the Business Energy Use survey) where such are available.

Energy taxes

The largest component of energy taxes relates to taxes levied on fuel purchases. The overall environment taxes reported in the National Tax List are split according to fuel type excise data available from the Revenue Commissioners and NORA. Sustainable Energy Authority of Ireland (SEAI) Energy Balances data and CSO Business Energy Use survey data by fuel and NACE is then used to distribute excise and NORA tax paid to the economic sector of the payers. Carbon taxes are distributed to NACE sectors based on carbon dioxide emissions from fuel combustion in the Air Emissions Accounts. Taxes on electricity are disaggregated using SEAI Energy Balances and CSO Business Energy Use survey data on electricity consumption. Carbon credits purchased under the EU Emissions Trading System are assigned to the purchaser using data on verified emissions and free allowances by participants in the scheme. The new temporary windfall taxes are assigned to NACE sectors using information from Revenue. In this release, the mining and quarrying sector (NACE 05-09) and the electricity and gas sector (NACE 35) have been combined for confidentiality reasons.

Transport taxes

Revenues from transport taxes are predominantly derived from two sources, Motor tax and Vehicle Registration Tax (VRT). The National Tax List splits Motor tax into household and business components. Revenue data on VRT, combined with CSO transport statistics on vehicle numbers, road freight, and transport fuel use, were the main data sources used to assign transport taxes to NACE Rev. 2 sectors. 

Pollution and Resource taxes

There are three taxes classified as Pollution or Resource taxes, namely a Landfill levy, a Plastic bag levy, and a Fisheries levy. Revenue raised from the Landfill levy (a “per tonne” levy on waste disposed of via landfill) is allocated using the Supply-Use tables. The Plastic bag levy is levied on shoppers; accordingly, it is allocated entirely to households.

The Fisheries levy is a small resource tax levied on fishing. The bulk of this tax is allocated to households and non-residents (arising from rod-licences) with commercial licences allocated to NACE 03 (fishing sector).

List of Environment Tax Bases

The manual, "Environment taxes - a statistical guide", published by Eurostat is the relevant source for defining what tax bases are to be considered within the remit of environment taxes. All taxes levied on these bases are thereafter considered to be environment type taxes regardless of the reason why the tax was originally introduced. The 2013 update of the manual lists the following environment tax bases:

Energy taxes (including fuel for transport)

  • Energy products for transport purposes
    Unleaded and Leaded Petrol, Diesel and other energy products for transport purposes (e.g. LPG, natural gas, kerosene or fuel oil)
  • Energy products for stationary purposes
    Light fuel oil, Heavy fuel oil, Natural gas, Coal, Coke, Biofuels, Electricity consumption and production, District heat consumption and production and other energy products for stationary use
  • Greenhouse gases
    Carbon content of fuels and emissions of greenhouse gases (including proceeds from emission permits recorded as taxes in the National Accounts)

Transport (excluding fuel for transport)

  • Motor vehicles import or sale (one off taxes)
  • Registration or use of motor vehicles, recurrent (e.g. yearly taxes)
  • Road use (e.g. motorway taxes)
  • Congestion charges and city tolls (if taxes in national accounts)
  • Other means of transport (ships, airplanes, railways, etc.)
  • Transportation infrastructure
  • Flights and flight tickets
  • Vehicle insurance (excludes general insurance taxes) 

Pollution

  • Measured or estimated emissions to air
    Measured or estimated NOx emissions, measured or estimated SOx emissions and other measured or estimated emissions to air (excluding CO2
  • Ozone depleting substances (e.g. CFCs or halons)
    Measured or estimated effluents to water
    Measured or estimated effluents of oxidisable matter (BOD, COD) and other measured or estimated effluents to water
  • Waste management 
    Collection, treatment or disposal, and individual products (e.g. packaging, beverage containers, batteries, tyres, lubricants)
  • Noise (e.g. aircraft take-off and landings)

Resources

  • Water abstraction 
  • Harvesting of biological resources (e.g. timber, hunted and fished species) 
  • Extraction of raw materials (e.g. minerals, oil and gas) 
  • Landscape changes and cutting of trees 
  • Energy products for transport purposes

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