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Spanish government seeks to collect €500 million extra in green taxes

A budget plan submitted to Brussels outlines new EU-recommended environmental levies

The Spanish government is planning on approving EU-recommended environmental taxes, which it hopes will pump an extra €500 million into state coffers. That’s according to a new budget plan due to be sent off to Brussels today – a document that outlines how the executive aims to hit the European Union’s public deficit target of 3.1% of GDP in 2017.

A petrochemical plant in Tarragona in Catalonia.
A petrochemical plant in Tarragona in Catalonia.

With the government having said it will not touch income tax or valued-added tax, it has been forced to look for other ways to boost revenue and achieve EU targets. Recently, the executive announced it hoped to collect an additional €8 billion through changes to the corporate tax regime and hikes to levies on alcohol and tobacco. A new tax on sugary drinks has also been mooted with green taxes now making up the last piece of the budget puzzle.

Spain’s revenue from environmental taxes is among the lowest in Europe with levies on energy production, pollution and hydrocarbons equal to 1.86% of GDP against an EU average of 2.5%, according to the latest figures from the EU’s statistics agency Eurostat, which cover 2014.

Large energy firms argue the current tax regime is punishing enough

Both the European Commission and the Organisation for Economic Co-operation and Development (OECD) have repeatedly stated Spain should raise tax on these so-called “negative externalities,” or costs suffered by a third party because of the consumption of a taxed item.

This is why the Popular Party (PP) government, led by Prime Minister Mariano Rajoy, has included such taxes in its new budget plan for Brussels, according to government sources.

However, the government will still have to hammer out the finer details with other political parties, with no decision yet taken on what will be taxed. The Finance Ministry is reluctant to raise taxes on hydrocarbons because this will have a negative impact on transport firms.

Spain’s revenue from environmental taxes is among the lowest in the EU: 1.86% against an average of 2.5%

Since 2012, the Spanish government has created new environmental taxes on items including fluorinated gas emissions and the use of fresh water to produce energy. The country has also rolled out a tax on consumers who make use of solar energy and on spent nuclear fuel and the storage of nuclear waste. These new taxes contributed €1.86 billion to state coffers in 2015, according to Tax Office figures.

Regional environmental taxes brought in €19.25 billion with most of that amount coming from energy taxes (€16.1 billion). A further €2.49 billion came from transport taxes while levies on pollution brought in €669 million.

Large energy firms have responded negatively to news of the proposed new taxes, according to company sources. They believe they will pay the lion’s share of these new levies and that their tax burden is already punishing enough. They also note that the proposed taxes come on top of plans to change the corporate tax structure.

English version by George Mills.

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