Reforming the Tax System to Promote Environmental Objectives: An Application to Mauritius
IMF Working Papers, June 1, 2011
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- Reforming the Tax System to Promote Environmental Objectives: An Application to Mauritius
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Bibliographic details
- Authors: Ian W.H. Parry
- Published: June 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455263417.001
Summary and scope
- Author: Ian W.H. Parry
- Date: June 1, 2011
- Core premise: Fiscal instruments are potentially among the most effective, and cost-effective, options for addressing externalities related to poor air quality, urban road congestion, and greenhouse gases.
- Case study focus: Mauritius (described as a pioneer in the use of green taxes).
- Main policy instruments examined:
- An explicit carbon tax.
- A variety of options for reforming vehicle taxes to meet environmental, equity, and revenue objectives.
- A progressive transition to usage-based vehicle taxes to address congestion.
Key findings and analytical themes
- Fiscal instruments can simultaneously target multiple externalities: air pollution, congestion, and greenhouse gas emissions.
- Existing taxes on fuels and vehicles present opportunities for reform to better address environmental externalities.
- Reform options need to balance three objectives: environmental effectiveness, equity, and revenue generation.
- Usage-based vehicle taxes are highlighted as an approach for addressing urban road congestion through gradual implementation.
Policy recommendations and reform options (as discussed)
- Implement an explicit carbon tax to directly price greenhouse gas emissions.
- Reform vehicle ownership and registration taxes to better reflect environmental externalities (including options to adjust tax design and tax rates).
- Transition progressively from ownership-based vehicle taxes to usage-based vehicle taxes to more effectively address congestion.
- Use reform design choices to mitigate adverse equity impacts while preserving environmental incentives and revenue goals.
Subject classifications and keywords (as provided)
- Subject: Environment, Excises, Expenditure, Fuel tax, Greenhouse gas emissions, Public expenditure review, Taxes, Vehicle taxes
- Keywords: congestion, E. vehicle ownership tax, Excises, Fuel tax, Global, global warming, green tax, green taxes, Greenhouse gas emissions, ownership tax, percentage tax, price rise, proportional tax, Public expenditure review, reform option, tax design, tax rate, tax saving, tax system, vehicle exemption, vehicle price rise, vehicle tax, vehicle taxes, vehicle use, WP
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