Finns call for greener taxes

By Emily Smith

Date: 18/05/06

European taxes should be better targeted to environmental effects and less to earnings, according to the Finnish environment minister Jan-Erik Enestam.

"In the future, taxation must be based more on ecology than labour [income], since labour costs in the EU on average are already high," said Enestam, speaking to journalists in Helsinki last week (12 May), ahead of Finland's assumption of the rotating EU presidency on 1 July.

But just raising taxes on the least environmentally friendly products and services would not necessarily make much difference in the long run, he warned.

"Once you succeed with environmental product taxation you succeed in changing people's behaviour, so you get no money," he said.

Instead of pushing to increase taxes on polluting products, Finland would like to get Europe talking about ways to change the tax system from the bottom up.

"This should preferably be EU co-ordinated so every EU country adopts...the same way of moving from income labour tax to a more ecologically-based tax."

Many environmentalists support the idea of moving away from labour taxation towards eco-taxation, a process described as the "green shift". This would mean, for example, taxing polluting companies and activities. Currently, any EU-wide change to taxation requires the support of all 25 member states. Enestam stressed that Finland's position would need time to catch on in the rest of Europe. A key element of the proposed EU constitution, currently in limbo following its rejection by French and Dutch voters, could, he said, offer a short-term solution. The constitution would support an increased emphasis on smaller groups of countries working together, a process known as enhanced co-operation.

Enestam's comments are in line with a recent leaked document from the European Commission environment department stressing the constitution's environmental benefits.

The internal document suggested using enhanced co-operation "to promote environmental tax reform".

Comments by Finnish environment minister Jan-Erik Enestam, who said on 12 May 2006 that European taxes should be better targeted to environmental effects and less to earnings. Finland was to take over the Presidency of the EU on 1 January 2006.