Environmental externalities of taxes and fees

Sipos, Nikoletta

Keywords: protection of the environment, taxes

In order to reduce the adverse consequences of road traffic, Hungary could introduce the so-called ‘bike money’, a tax-free amount due to everyone who walks or rides a bicycle to work. In addition to having external environmental benefits, the resulting positive externalities include better health and lower national health insurance costs; also, this means of transportation requires less energy and space. City road tolls could be introduced to provide revenue to municipal governments, to make settlements more liveable and to improve the environment and traffic. Insurance tax payable on car insurance would keep revenue gained in the country within the country. Also, health costs incurred from car accidents (even if the person was commuting to work) should be transferred from the national health insurance system to commercial insurance companies. The price of electricity, natural gas, oil and coal is calculated on the basis of higher-than-actual import prices; therefore extra taxes should be levied on extra profit made in the field of raw materials. Tax benefits (VAT, personal income tax) associated with home improvements, revenue and savings from the sale of real estate have a significant effect on the economy, social conditions, public expenditure and the environment through their influence on housing. To preserve the positive effects of green areas, ‘coverage’ fee could be levied on paved spaces. Consumer goods which last over 50% less than the average and cannot be repaired should be subjected to an environmental tax in order to reduce the amount of waste produced.

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