The latest move by the government to collect more revenue from people is the introduction of a carbon tax. Vehicle owners will have to pay a carbon tax based on the engine capacity and the year of manufacture of their vehicles from next year onwards. Older vehicles and those with bigger engines will be taxed more. Electric vehicles (EVs) have been exempted from the tax. According to the 2018 budget, the government expects to collect Rs.2.5 billion from the tax.
However, this carbon tax, which is introduced in the guise of a progressive measure to protect the environment, is fundamentally flawed. It has now come to light that bigger the engine, bigger the carbon footprint, isn’t always the case. Tests have revealed that vehicles with smaller engines tend to emit more carbon dioxide and nitrogen oxide when they carry more than light to moderate loads. For example, the carbon footprint of an 800cc Maruti loaded with five people with some luggage could be higher than the carbon footprint of a Toyota Camry with a 1800cc engine carrying only one or two people.
At the same time, the new carbon tax violates the most basic tax principle of equity by taxing on the engine capacity and not on the usage. A retiree might take out his Toyota Camry to buy groceries only on weekends and to visit the doctor every month, whereas a Maruti owner could be driving to work six days of the week. This would make the carbon footprint of the Maruti owner much higher, although his car has a smaller engine, compared to the Camry. But he will still be taxed lower, as opposed to the Camry owner.
Further, this carbon tax, like many other taxes, burdens the poor than the rich. The poor or low-income people generally own older vehicles, which are less expensive, while the rich always go for the latest models with higher price tags. Hence, taxing on the age of the vehicle will make the relatively poor people pay more taxes.
Another bizarre feature of the new carbon tax is the exemption given to EVs. Studies have shown that the carbon footprint of electric and hybrid vehicles during their production is higher than the traditional cars running on gasoline. Also, in Sri Lanka, almost all the electric cars are charged using the electricity sourced from burning coal or furnace oil. Yes, electric cars don’t emit carbon dioxide or nitrogen oxide. But that doesn’t mean that they don’t contribute to pollution. It just means that the source of pollution moves from the car to the power plant.
On top of all these, the Sri Lankan vehicle owners have already been paying an emissions tax to the government for years. It is mandated for all privately owned vehicles to undergo an emissions test every year, prior to the renewal of the revenue licence. Three private companies carry out these tests and they charge the tax from the vehicle owners on the government’s behalf.
Another problem with the emissions test as well as the new carbon tax is their arbitrary nature. They only apply to the vehicles owned by the private citizens. The vehicles owned by the government or its institutions neither undergo emissions tests nor pay carbon taxes. The vehicles belonging to the government could be the worst polluters on Sri Lankan roads as most of them are poorly maintained. Following the introduction of the carbon tax, many on social media had quipped whether the vehicles owned by the government emit mist instead of smoke? (Aanduwe waahana welin pitawenne dum neme meedumada?)
If the honest intention of these pollution taxes is to protect the environment by utilizing the tax money on green initiatives as claimed by Finance and Mass Media Minister Mangala Samaraweera, such funds need to be ring-fenced specifically for those purposes. But as of now, we cannot see any effort taken towards that, which proves that the carbon tax is just another tax by a desperate government to balance its books.
As many enlightened minds would agree, the problem Sri Lanka has been having for years is its rather stupid effort to implement the First-World laws, regulations and practices despite being a Third-World or a developing country. There is no harm aiming high but one has to be attuned to the ground realities when designing policies. The carbon tax is one such ill-thought-out policy, which has nothing to do with protecting nature and the environment but everything to do with shoring up the government revenue to help plug in the country’s ever expanding fiscal deficit. If the government really wants to protect nature and the environment, they should converge all their efforts to stop the deforestation that is happening at an alarming rate, due to human activities. At least shouldn’t the policymakers be decent enough to tell the public the simple and plain truth than preaching lofty ideals (or lorry talks as the common man on the street would say) when they slam us with more taxes? Is that too much to ask?