Principles of taxing for environmental emission and use of natural resources

Table of contents: The Kazakh-American Free University Academic Journal №5 - 2013

Author: Gavrilova Yuliya , Kazakh-American Free University, Kazakhstan

Principles, i.e. fundamentals for legal regulation of relations between nature and society, are intended to find out main tendencies of environmental taxes levying.

Let’s make an attempt to distinguish key points of our vision of principles concerning tax-levying for environmental emission and use of natural resources based on state standards and theoretical views of scholars studying legal problems of environment protection and rational nature management.

Proceeding from the fact that environmental payments in their legal nature are not to be taxes, the lawmaker needs to follow the principle of fiscal neutrality. According to the Tax Code of the Republic of Kazakhstan tax is a compulsory contribution to state revenue levied by the government.

The main purpose of tax levying is financial support of state activity. In some respects environmental payments are taxes but the main purpose of their levying is nature protection stimulation. It is known that emissions in excess of the permissible limits are paid at the increased rate, thus inducing natural resources users to conform with the regulations. Thus, material interest of natural resources users in rational nature management leads to favorable environment. T. Petrova stated the payment base of environmental pollution payments is “either emissions to atmosphere and water or waste products. Hence, the less the payment base (and consequently the volume of payment), the more it meets the requirements of environment protection, society, and state. From this point of view, environmental payments differ from other statutory payments and taxes” [1, p. 65].

In Kazakhstani law there is no a definition for the institution of tax for environmental emission and use of natural resources. On the one hand, such payments are stipulated in the articles of Environmental Code which is one of the gears of economic regulation for environment protection and use. On the other hand, the procedure of environmental payments levying is regulated by the norms of Tax Law. From our point of view, the system of environmental payments is to be developed in the terms of its eco-legal nature, not fiscal.

Professor T. Petrova gives convincing theoretical ground in favor of non-tax nature of environmental payments based on the following: compensatory nature of environmental payments and the correlation (though partial) of the payment with the volume of different types of emission. The given function of environmental payments is insured by the special-purpose and compensated nature of their levying thus being different from fiscal and gratuitous relations. The entity pays for use of natural resources and consequently for emission of a certain quantity of harmful substances. That is why environmental payments are considered to be a kind of process costs similar to land and water use fees. The given concept corresponds to the economic approach to the meaning of environmental payments as a form of compensation for the damage and as an element of environmental, not fiscal relations. In our opinion, it is an original legal concept of the environmental legislation having no parallels in tax or civil legislation. Its further development is thought to occur within the context of environmental not tax legislation as their objectives are quite different [2, p. 115].

The efficiency of environmental payments depends on the way of their expenditure. Therefore, environmental payments regulation is to be based on the principle of special-purpose use of environmental payments. These funds are to be used only for lessening the negative impact on the environment. The most telling example is the case of the void Environmental Law of the Republic of Kazakhstan stipulating the norms of special-purpose use of environmental payments to the State Fund of Environment Protection. According to Article 34 of the given Law the funds must not substitute other sources of finance and be used only for:

1) scientific and technological research, assistance to application of resource-saving and environmentally friendly technologies;

2) participation in financing of construction and reconstruction of environmental facilities carried out by legal entities – natural resource users;

3) accomplishment of measures on restoration of polluted natural resources;

4) payment of compensation in the procedure prescribed by the Law;

5) participation in development and realization of programs, projects, regulatory and procedural documents aimed at the improvement of the environment;

6) development of environmental education;

7) creation and development of natural areas of preferential protection;

8) upgrading of facilities of executive authorities in the field of environment protection;

9) other environmental purposes.

It is recommended to emphasize the significance of such organizations as the State Fund of Environment Protection. Their autonomy, from our point of view, is the guarantee of special-purpose use of the money. It is appropriate to cite M. Tleubergen, “The main purpose of such Funds is the formation of centralized financing source independent of the state budget necessary as a supporting state structure supplementing state expenditures for environmental purposes” [3, p. 17].

Nowadays environmental payments to state revenue are not always used purposefully. Local executive authorities appropriate the funds for environmental measures on leftovers thus turning the system of environmental payments into the source of state revenue. The volume of environmental payments to state revenue increase year on year. For instance, over a period of 2002-2004 the volume of environmental payments increased more than twice and accounted for 15841 million KZT. Besides, in 2004 financing of environmental measures all over the country made up 3347 million KZT or 21% of all payments (in 2003 – 27%) thus illustrating disinterest of local executive authorities in solving environmental problems. Environmental measures are more financed in Almaty city - 76.5%, Kostanay region – 73%, Almaty region – 72%, Southern-Kazakhstan region – 58%, Kyzylorda region – 52.1%. Akmolinsk region, Eastern-Kazakhstan region, Zhambyl region, Western-Kazakhstan region, Karaganda region, Mangistau region, and Astana city did not fulfill their plans of environmental measures financing. Atyrau region and Pavlodar region did not draw the minimum of appropriated funds.

The history of eco-legal regulation of special-purpose use of environmental payments confirms the fact that the Environmental Code currently in force requires its supplementing with the norms stipulating special-purpose use of environmental funds.

The principle of environmental payments declaring is also to become very important. According to it, all payers must submit declarations to authorized government bodies enclosing all necessary documents to check the accuracy of the amount of charge calculations. The lawmaker is to assign the objects of declaring, the rights, duties, and responsibilities of declarants, the procedure and the terms of environmental payments declaring, etc. The given principle is similar to the taxation principle stipulated by Article 5 of the Tax Code of the Republic of Kazakhstan – the principle of determinacy. It describes all grounds and order of origin and discharge of tax duties, the responsibilities of tax agents to calculate, withhold, and remit taxes. So, the suggested environmental payments declaring principle has analogy with the institution of declaration taken from the Tariff Legislation and with the principle of taxation determinacy of the Tax Code of the Republic of Kazakhstan.

The above-mentioned fundamental principle is also interrelated with the principle of timely and compulsory environmental payments. It is necessary to take into account the fact that authorized authorities must check the accuracy and timeliness of environmental payments to state revenue levied by the environmental agencies. The agencies of the Ministry of Environment and Water Resources of the Republic of Kazakhstan must assign the subjects for environmental payments and the payment base; maintain records of pollution sources and environmental payers; fix differentiated emission and pollution quotas; develop procedural guidelines for environmental taxes levying. It should be noted that in the Republic of Kazakhstan all these functions are conferred on environmental and (partially) fiscal agencies. In our opinion, financial control over environmental payments is to be carried out by state environmental bodies for better recording the environmental pollutants.

Kazakhstani researcher A. Assylbekov considers ecological monitoring as a special-purpose activity of state governing bodies aiming at control of compliance with environmental requirements, identification of reasons and terms of origin of environmental liability, and prevention of legislation violation [4, p.47]. We share his opinion and suggest to consider control over environmental taxes as a part of ecological monitoring exercised by the Environmental Ministry bodies and to stipulate it in Article 114 of the Environmental Code of the Republic of Kazakhstan. Article 114 does not describe specific objectives for monitoring in the sphere of environmental taxes. To fill this gap it is recommended to work out Regulations for State Monitoring of Environmental Payments. The given document is to be approved by the Minister of Environment and Water Resources and define: the title of tax-levying organizations and their competence; the procedure of control over environmental payments; requirements to reporting forms; the procedure of taking measures after monitoring, etc.

It should be emphasized that the system of environmental taxes monitoring depends on the efficiency of the state environmental control over pollutants. Such taxes may be levied only in cases of pollution in the excess of the established limits. To record such cases the state is to implement instruments of control over pollutant emissions at enterprises and to daily maintain records of emission volume and compliance.

The significance of the given principle becomes evident in case of difference between officially declared and real environment exposure levels exposed during environmental auditing.

The term “auditing” is taken from financial vocabulary. World Bank gives the following definition: “Environmental Auditing is a systematic study of ecological information about an organization or a facility for compliance with auditing criteria”. The criteria are defined by the reasons and objectives for auditing. The Head of the State Environmental Impact Assessment Department of the Territorial Environmental Administration (Karaganda region) G. Sukhorukov considers one of the objectives of environmental auditing “troubleshooting of accounting, reporting, operating, and financial records” [5, p. 13]. In our opinion, Article 80 of the Environmental Code of the Republic of Kazakhstan stipulating general provisions for environmental auditing is to be supplemented with the defining of the objective to make the process of environmental auditing more comprehensive.

Even more, in the end of 1990 commercial banks of industrially advanced countries used environmental auditing to minimize risks of nonpayment on loans caused by drawbacks of environmental management of organizations - recipients of loans. Over the last years international banks resorted to environmental auditing as an instrument of environmental management using past and current data of environmental impact assessment at the financed organizations and companies, e.g. environmental auditing of the metallurgical complex in Temirtau (Karaganda region).

In some countries, including USA, the objective of environmental auditing is not only the compliance with the environmental legislation but the ground for development of pollution abatement policy.

According to P. Vaganov, “Nowadays the USA Federal Government expends annually more than 30 billion USD for habitat restoration and protection projects. As it is not enough, problems of optimal allocation of funds and environmental programs supervision become more and more urgent. Some experts see the solution of the problems in development and stipulation in environmental legislation the concept of eco-risk allowing to use credible qualitative criteria for decision-making process. Qualitative rating potential is conditioned by the analysis of eco-risk being based on the so-called two-dimensional risk detection (the product of environmental damage severity estimate and environmental damage probability ratio). So, if we estimate a certain ecocatastrophe aftermath of 100 million USD and the its probability of 1 % (0,01), the corresponding risk makes up one million USD. If we estimate the cost of some environmental measures taken of 300.000 USD and the probability of the catastrophe 10-fold reduced, the residual risk makes up 100.000 USD. The derived benefit is estimated as a difference between the initial and residual risks at the sum of 900.000 USD (three times the cost of measures) [6, p.84].

At the same time due to the established access of economic entities to natural capital in the environmental legislation of the Republic of Kazakhstan there are no amendments to economically justify eco-risk. Moreover, the concept “eco-risk as a probability of unfavorable environmental changes as a result of certain factors” stipulated in general provisions of the Environmental Code of the Republic of Kazakhstan neither includes in the theory of risk nor reflects the economic constituent of eco-risk thus impossible to be regulated by economic methods. As well as Professor G. Motkin we consider eco-risk a situational qualitative index of environmental threat taking into account its aftermath as a form of economic damage caused by a recipient at certain probability [7, p. 5].

As can be seen from the above, environmental auditing is closely related to different eco-legal and economic mechanisms and turns from “conventional law enforcement instrument into economic and legal instrument of environmental activity incentive. The environmental activity conformance inspection allows to find out the causes of environmental offences and to take appropriate measures to exclude fine sanction imposing, e.g. in case of an environmental offence the procedure of auditing may lessen the fine rate” [5, p. 12].

Late payment of environmental taxes is related to the principle of unavoidability of responsibility for violation of legislation in the sphere of environmental taxes applying both to tax-payers and state tax levying authorities. Inappropriate diversion of state revenue funds is the grounds of liability for violation of legislation in the sphere of environmental taxes.

Within the given context it is necessary to emphasize the following: the payment for environmental emission and use of natural resources shall not exempt the entity from environmental damage repair.

Another important principle in the sphere of environmental payments is the one of environment impact licensing. The license allows to use natural resources on certain conditions and stipulates the terms of payment. There are different types of licenses in meaning and in form. For instance, the grounds for forest use are either a felling license or a forestry card. The felling license gives the right to harvest wood, soft resin, tree sap, etc. The forestry card gives the right to use woodlands for hunting, research, tourism, and recreation. The forms of felling licenses and forestry cards and the procedures of their accounting, storage, completion, and distribution are established by state authorities.

According to the Decree of the Government of the Republic of Kazakhstan “On Adoption of Regulations for Licensing Wildlife Use”, licenses for hunting and fishing may be in the form of stamps with the picture and description of animals. The list of animal species for hunting and fishing is also established by state authorities.

Licensing of environmental emission is regulated by the Environmental Code of the Republic of Kazakhstan (hereinafter referred to as EC RK). According to Paragraph 2 of Article 101 of EC RK environmental payments for emissions within the permissible limits are levied under the List of Pollutants approved by the Government of the Republic of Kazakhstan. Article 70 of EC RK stipulates the list of documents for environmental emission licensing:

1) information about the user of natural resources and the type of activity;

2) license validity;

3) the terms of nature resources use including emission limits;

4) the program of environmental measures for the period of license;

5) the program of environmental control.

We must emphasize that according to the given article environmental emission licensing does not concern norms of taxing for environmental emissions. Therefore it is recommended to draw lawmakers’ attention to stipulating the proposition about obligatory presentation of documents of environmental payments to Article 70 of EC RK.

To summarize, it can be noted that despite gradual introduction of contractual basis to environmental relations the administrative regulation is still of great importance.

The list of principles of environmental taxes levying can be continued as they reflect not only current relations but progressive tendencies of social development. Their importance is obvious as most of them include models of rights and responsibilities of legal relations of the norms stipulated in the EC RK and in other environmental documents.

In spite of the fact that principles of environmental taxes levying are a well-defined system based on their complexity, they may become more specific falling into autonomous groups depending on specific relations they regulate, for instance, principles of taxes for environmental emission, principles of taxes for use of certain class of natural resources.

At the same time principles of environmental taxes levying require regulatory support to make them one of the effective instruments of environmental regulation of the economy. The concept is to become a program document defining principles and strategies for further improvement of environmental taxes system.


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Table of contents: The Kazakh-American Free University Academic Journal №5 - 2013

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