The country needs a clear mechanism for environmental taxation

21/ 05/ 2020

Today, the country needs to address the issue of changing the mechanism of collection and use of the eco-tax, as the rates of the environmental tax have increased almost 25 times over the last year. However, the funds, that should be used for the implementation of measures to eliminate and reduce the impact on the environment, go to the activities that do not fully meet the compensatory function of the eco-tax, for example, planting trees. As of today, 5 draft laws on amendments to the mechanism of collection and use of the eco-tax are registered in the Verkhovna Rada – No.2367, No.2367-1, No.2367-2, No.2465 and No.2465-1. According to business, each of these documents has its own rational proposals, but none of them can be accepted as a basis for reforming environmental taxation. Therefore, it is worth working not on the number, but on the quality of legislative initiatives - to develop a truly effective system that ensures the rational use of funds paid by businesses to the budget as the eco-tax. Therefore, the European Business Association suggests consolidating effective proposals from all 5 drafts in one agreed draft law. The business would like to emphasize on the following 5 key factors: ensuring the targeted use of revenues from the eco-tax as a financial instrument of the state support and incentives for the modernization of companies and environmental measures; allocating a bigger share of eco-tax revenues to local budgets in the proportion of 70% - local budgets, 30% - the state budget, and exclusively through special funds; enabling the business to invest up to 70% of the eco-tax in environmental projects within the regions of its presence by reducing the amount of eco-tax accrued for the reporting period on the number of costs and capital investments aimed at environmental protection and prevention, reduction or elimination of pollution; updating the list of environmental measures provided by the Cabinet of Ministers with such European practices as energy resources management, the introduction of heat and energy-saving technologies, construction, and repair of roads using industrial waste, etc.; introducing a temporary moratorium on raising the eco-tax rate until the end of 2021 and making further decisions on raising it based on long-term forecasting of economic, social, and environmental consequences. Business urges MPs to take these proposals into account in order to launch a quality taxation system and to ensure that the UAH 3.9 billion of environmental taxes paid by businesses last year are used for their intended purpose.

As of today, 5 draft laws on amendments to the mechanism of collection and use of the eco-tax are registered in the Verkhovna Rada – No.2367, No.2367-1, No.2367-2, No.2465 and No.2465-1.

According to business, each of these documents has its own rational proposals, but none of them can be accepted as a basis for reforming environmental taxation. Therefore, it is worth working not on the number, but on the quality of legislative initiatives – to develop a truly effective system that ensures the rational use of funds paid by businesses to the budget as the eco-tax.

Therefore, the European Business Association suggests consolidating effective proposals from all 5 drafts in one agreed draft law. The business would like to emphasize on the following 5 key factors:

ensuring the targeted use of revenues from the eco-tax as a financial instrument of the state support and incentives for the modernization of companies and environmental measures;
allocating a bigger share of eco-tax revenues to local budgets in the proportion of 70% – local budgets, 30% – the state budget, and exclusively through special funds;
enabling the business to invest up to 70% of the eco-tax in environmental projects within the regions of its presence by reducing the amount of eco-tax accrued for the reporting period on the number of costs and capital investments aimed at environmental protection and prevention, reduction or elimination of pollution;
updating the list of environmental measures provided by the Cabinet of Ministers with such European practices as energy resources management, the introduction of heat and energy-saving technologies, construction, and repair of roads using industrial waste, etc.;
introducing a temporary moratorium on raising the eco-tax rate until the end of 2021 and making further decisions on raising it based on long-term forecasting of economic, social, and environmental consequences.

Business urges MPs to take these proposals into account in order to launch a quality taxation system and to ensure that the UAH 3.9 billion of environmental taxes paid by businesses last year are used for their intended purpose.