Date: 29/06/2021

Environmental charges: green investments or parafiscal levies?

AmCham advocates transparency in the use of environmental funds and consistent application of the ‘polluter pays’ principle in collecting environmental revenues

Nearly one-half of all AmCham member companies believe the Serbian development budget ought to earmark more funds for environmental protection. Environmental charges, which are a form of public revenue in addition to taxation, should clearly incentivise companies to make operating decisions that contribute to attaining environmental objectives. If an environmental charge is designed solely to raise revenue, it is in essence a parafiscal levy that does not promote a rational approach to the environment by either businesses or the public, and attracts growing calls for reduction or outright elimination.

An assessment conducted by AmCham with support from the Centre for International Private Entrepreneurship (CIPE) looked at options for streamlining regulations that govern environmental charges to ensure they incentivise and correct behaviour, address issues with their implementation, and enhance transparency of public spending on environmental projects. The effort focused on the environmental improvement and protection charge and the charge for use of protected areas.

AmCham recommends merging the environmental improvement and protection charge and the charge for use of protected areas and basing the amount payable on measured air pollution, together with a gradual increase in the charge per quantity of emissions and extension of its reach to cover all those who release pollutants into the air. This would ensure consistency in applying the ‘polluter pays’ principle and give polluters an incentive to invest in reducing pollution.

‘The assessment has shown that information about expenditure on local environmental projects is unreliable, as costs are inconsistently grouped into the environmental protection category, which also affects comparability. According to the available data, for every dinar raised they raise from environmental protection charges, the local authorities we looked at invest between 0 and 0.4 dinars into reducing pollution. This figure goes a long way to show why fee payers are unhappy with these charges. Planning and reporting environmental protection programmes must be improved and clear guidance must be provided as to what constitutes environmental protection expenditure. This would ensure greater transparency and allow interested stakeholders to assess whether the funds were spent constructively and effectively’, said Milica Bisić, Head of Corporate Affairs at KPMG, who authored the study.

AmCham also recommends the charge for use of protected areas should be payable into a public revenue account to ensure a minimum of transparency in terms of collection rates and use of the funds, as well as to allow impact of the charge arrangement to be assessed. Another suggestion is to consolidate the more than 80 various grounds for assessing the charge into two broad groups based on whether the charge is intended to achieve a corrective (deterrent) effect or aims at raising revenue (in connection with maintenance costs). Lastly, the fee for using water and mineral resources should be based on the surface area of the protected region utilised for the activity in question rather than on the quantity of the resource extracted. All these changes should ensure greater transparency of revenues and expenditures in connection with protected areas, eliminate multiple overlapping charges levied for the same public resource, and lead to better planning, reporting, and co-operation between resource managers and users so that protected areas can be safeguarded more effectively.

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