A green tax would help augment government revenue

Source: The post is based on the article “A green tax would help augment government revenue” published in the Livemint on 8^th November 2022.

Syllabus: GS – 3 – changes in industrial policy and their effects on industrial growth.

Relevance: About levying a green tax.

News: The government has been looking at different ways of augmenting its revenues in its fight against climate change. Levying a green tax is one such move.

Why does India need to levy a green tax?

1) India’s top 4,000 odd companies had a combined turnover of roughly ₹100 trillion in 2021-22. On average, if the green tax rate is, 0.5% of turnover, the government can rake in an amount of ₹50,000 crores annually.

2) As the government is already planning to issue green bonds for projects that are environmentally compliant, a green tax would complement this effort.

3) Make businesses pay for the damage caused to the environment.

4) Some companies have been observed to indulge in ‘greenwashing’ just to meet CSR obligations. A separate tax would defeat greenwashing.

What India has to do before levying a green tax?

Every economic activity adds its bit to pollution and can be brought under the tax net. The Centre needs to commission research agencies to independently evaluate the emissions of all industries and set standards for the same.

No need to be uniform: The green tax need not be uniformly applied, and its rate could vary from 0.1% to 2%, depending on the industry concerned. As the sales of these companies or industries grow, they would automatically yield higher revenues to the government.

Focus on industrial groups: Ideally, India’s green tax should be levied on a company based on emissions that can be measured. As it is difficult to assess, India can slot companies into industry groups and levy taxes on them.

Focus on consumer: Consumers of products and services that are environmentally unfriendly should be made accountable and should pay for the same. For instance, levying green tax on older vehicles.