(Corrects reference to the author)
By Stelios Orphanides
A Cypriot academic said that the government should help the economy engage in less nature-harming activities through a fundamental overhaul of its tax system, which would also result in more employment.
“Many European countries have gone ahead with a green tax reform,” said associate professor Theodoros Zachariadis according to the university’s October news bulletin. “This includes a partial differentiation of the source of state revenue by reducing capital and labour taxation, accompanied by a proportionally increased taxing of natural resources consuming or polluting activities”.
Zachariadis who teaches at the department of environmental studies and technology of the Limassol-based Cyprus University of Technology proposed the a “gradual introduction of a carbon tax every year over the next five-year period on all fuel consumed in areas of the economy not part of the greenhouse gas emissions trading scheme”, plus the introduction of a water use charge that will reflect water scarcity and will cover the environmental impact of water consumption in Cyprus.
In addition, he proposed a single charge of household waste with the introduction of a horizontal waste burial tax over the next three-year period. “Part of this revenue will cover the Cyprus-wide waste management cost and the rest will serve as a green tax aiming at helping to reduce the flow of waste to landfills and to encourage alternative practices, such as its reduction, reuse or recycling”.
“It is suggested that the green tax reform be fiscally neutral to prevent the overall environmental burden from growing,” he said. “Increased revenue from environmental taxes could help reduce labour cost –via reduction of social security contributions or other charges— and compensate vulnerable households”.
Zachariadis said that research in Europe has demonstrated that green taxes distort economic activity less and are not detrimental to employment while at the same time, they help reduce the use of energy and natural resources, which income tax and social security contributions do not.
“Especially in times of high unemployment, reducing labour cost by decreasing both direct and indirect labour tax, becomes a priority,” he said.