What Is Ecological Tax Reform and Why Do We Need It?
The role of environmental taxes and fees is small in Estonia compared to the member states of the European Union, and as a result, the influence on economic players is also small and does not motivate the latter to act in more conservationist fashion.
According to forecasts, a total of 3.8 billion kroons or 2.5% of the GDP will be received by the state in 2005 in the form of environmental taxes and fees. Even though the main goal of ecological tax reform is protecting the environment, the other aspect of reform is reducing workforce taxation. As a result of lowering the income tax, the tax burden will fall in 2006 to 32.6% of the GDP, compared to 33.3% or 0.7% of the GDP in 2003. This means that in order to keep the general tax burden at the 2003 level, the government can adopt measures that would increase receipts of environmental taxes and fees or other taxes on consumption by 0.7% of GDP. Estimates of the rise in environmental fees show that this would not result in a significant rise in production costs and drop in competitiveness at Estonian companies. Nor will environmental conservation-associated costs for households outgrow capacity.