Coase The case of Brazil and the Tax on

Coase (1960)
proposes property rights and is interested in keeping in mind that the
externality is only one of the consequences and the problem is that many
economists believe that the government is the solution to market failures. Coase
claims that in less presence or absence of transaction costs and when the
property rights of a good are established and do not provide an effective
economic solution, these will be assigned to the subject that values them most.

This proposal has great influence for the creation of environmental taxes,
however, it has certain limitations, since the transaction costs between
private arrangements, agreements, etc., are usually high (Mendezcarlo, et al.,
2010).

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1.    
Discussion

Around
the 1980s, modern countries began to use environmental taxation as a tool to reduce
unemployment and reduce the damage to the ozone layer (Rodríguez, 2008).

Nations such as Finland, Sweden, Germany, the Netherlands, Norway, the United
Kingdom and Italy have carried out environmental reforms in which a 2% increase
in the tax burden has been obtained and GDP has increased by up to 9%,
indicating that it is possible to obtain benefits for the economy and make it
greener (Slavickiene and Ciuleviciene, 2014). Likewise, Barde (2002) based on
experiences of OECD countries states that 80% of the price of fuels are taxes,
so this increase in the price for taxes has had an impact on the search for
more environmentally friendly energy.

It is
highlighted that the United States, Japan, France, South Korea, the United
Kingdom, and China have been named the nations that most dynamically use taxes
to support sustainable development as well as an ecological policy (KPGM,
2013). The case of Brazil and the Tax on Circulation of Goods and Services used
since 1990 as an economic instrument for environmental management (Jatobá,
2005). Likewise, Chile in 2014 presented a tax reform to add environmental
taxes through emissions from fixed sources and imported diesel vehicles (Katz,
2014).

Around
1992 Mexico tries to implement environmental public policies to raise awareness
among consumers and producers. These policies have promoted fiscal incentives
for companies that use more environmentally friendly technology and thus join
environmental policy strategies international (Mendezcarlo & Medina, 2009).

Due to the fact that the General Law of Ecological Equilibrium and
Environmental Protection explicitly contemplated economic instruments in 1996,
it motivated an initiative for the Tax Law in 2003 to be published in the
Parliamentary Gazette. Environmental, however, despite the efforts made, a true
environmental fiscal policy was not created (Figueroa, 2005).

Among the
taxes related to the environment in Mexico are the Special Tax on Production
and Services (STPS), Car Sales Tax (CST) and the Tax on fossil fuels (Arlinghaus
& van Dender, 2017). The STPS plays an important role because it taxes
energy products, in this case oil (for gasoline and diesel), is classified as
the difference between the sale price to the public (without VAT) and the
market price. Recently, Mexico experienced a lower sales price than the market
price, a negative profit was obtained and consumers received a subsidy for an
amount equivalent to the differential in pesos (SHCP, 2012).

The Special
Tax on Production and Services is used to compensate the subsidy that the
government has provided in favor of consumers when the prices of the North
American coast are higher and when these fall, a positive collection is
obtained because in Mexico the prices are inelastic and in the International
market, oil and gasoline prices are elastic. (Arlinghaus & van Dender,
2017)

Since
2006, gasoline prices are set by the government at the beginning of each year
and the subsidy is given when the price is above fixed prices; it is known that
it has cost around 1.2% of the GDP from 2007 to 2011, an amount capable of
reducing part of the country’s social problems (Sarabia & Hernandez, 2014).

In addition to the STPS for the confirmation of the price, the final consumer
contributes 16% of VAT (Tepach, 2015). On the other hand, in the recent energy
reform in the fourteenth transitory article of the hydrocarbons law, it is
established that from January 1, 2015, and until December 31, 2017, the Federal
Executive will be in charge of regulating the maximum prices to the public of
gasoline and diesel, and from January 1, 2018, prices in Mexico are determined
under market conditions (Tepach, 2015).

It is
clear that it is necessary to make people aware of the collection of an
environmental tax by ensuring that the collection has a clear destiny and in
favor of environmental improvement. Whereas the costs for air pollution in 2013
represented 3.4% of the GDP at market prices with 538,669 MDP; the total cost
due to depletion and total environmental degradation of 909 968 MDP, which
represents 5.7% of the GDP, the costs for air pollution represent almost 60% of
the total costs (INEGI, 2014).

There are
several authors who have talked about environmental taxes related to the use of
fossil fuels worldwide, testing the hypothesis that these help in a certain way
to reduce negative environmental externalities and show their progressivity.

Barde
(2002) states that the elimination of subsidies or taxes that affect the
environment could bring a benefit by generating income that can be used to
reduce the level of other taxes. Slavickiene and Ciuleviciene (2014) confirm
this by evaluating the environmental influence of the environmental reform on
the tax burden, finding that in many countries environmental taxes form a large
part of the income, and as a result of this, worker taxes have been reduced.

Padilla
and Roca (2003) also point out that carbon taxes can be slightly regressive but
the effect can be corrected if the revenues collected are properly
redistributed and it is reaffirmed that the energy tax could be justified by
the progressive effects that would occur when using income in an effective way.