Environmental Fiscal reform in Hungary, the Czech republic, Poland and Denmark Necessity and possibilities of an ecological budget reform 2004 Prepared by: Clean Air Action Group, Hungary Society for Sustainable Living, Czech Republic Institute for Sustainable Development, Poland Danish Ecological Council Editor: Zoltán Szabó "This project is supported by a grant from The Regional Environmental Center for Central and Eastern Europe (REC), funded by the DANISH EPA (DANCEE). The opinions expressed in this publication do not necessarily represent the poli- cies or opinions of the REC. The REC assumes no liability, expressed or im- plied, arising out of the activities of any of its grantees." The Danish Ecological Council has taken part in the project - co-funded by the Danish Outdoor Council - Small Grant Facility 2 Table of Contents ENVIRONMENTAL FISCAL REFORM IN HUNGARY, THE CZECH REPUBLIC, POLAND AND DENMARK....................................................................................................1 FOREWORD........................................................................................................................7 NECESSITY AND POSSIBILITIES OF AN ECO-SOCIAL BUDGET REFORM IN HUNGARY................................................................................................................................9 INTRODUCTION .............................................................................................................................................. 9 REDUCTION OF WAGE COSTS AND INCREASE OF SUBSIDIES GRANTED FOR SOCIAL TASKS THAT CANNOT BE PLACED ON A MARKET BASIS........................................................................................................................ 10 1. REDUCING THE COSTS OF LIVE LABOUR ................................................................................................. 10 1.1. Reduction of social security contribution .................................................................................... 11 1.2. Reduction of personal income tax..................................................................................................... 12 2. HIGHER STATE CONTRIBUTION TO ENVIRONMENTAL PROTECTION AND HEALTHCARE...................... 13 2.1. Environmental and health protection awareness raising, information, education and culture ....... 13 2.2. Offsetting energy price rises; improving energy efficiency .............................................................. 14 2.3. Support to environmentally friendly means of transport .................................................................. 19 2.4. Protection of air quality.................................................................................................................... 27 2.5. Protection against noise and vibration............................................................................................. 27 2.6. Organizing integrated waste management........................................................................................ 27 2.7. Water and soil protection.................................................................................................................. 27 2.8. Support of the National Agrarian Environmental Protection Programme....................................... 28 2.9. Nature conservation; protection, improvement and extension of Hungary’s forest-lands and the green areas of its settlements......................................................................................................................... 28 2.10. Removal of long-term environmental damage and rehabilitation of contaminated areas ............. 29 3. ELIMINATION OF SUBSIDIES GRANTED TO ACTIVITIES DAMAGING THE ENVIRONMENT AND HUMAN HEALTH .............................................................................................................................................................. 30 3.1. Valorization of excise duties on petrol.............................................................................................. 36 3.2. Increased excise duties on diesel fuel ............................................................................................... 38 3.3. Imposing excise duties and VAT on fuels entering Hungary in fuel tanks of motor vehicles ........... 40 3.4. Valorization, increase and better collection of motor vehicle taxes................................................. 43 3.5. Imposing infrastructure charges on heavy trucks in compliance with the principle of competition under equal terms .......................................................................................................................................... 45 3.6. Imposing highly progressive road charges on motor vehicles with axle loads above 10 tons......... 48 3.7. Stricter rules for accounting expenses of motorcar use.................................................................... 49 3.8. Increased taxes on company cars ..................................................................................................... 49 3.9. Increase and effective collection of consumption tax (registration fee) on used motorcars ............ 52 3.10. Substantial reduction of subsidies to construct further high-speed roads...................................... 53 3.11. Introduction of urban road charges................................................................................................ 53 3.12. Compulsory introduction of parking fees........................................................................................ 54 3.13. Increased taxes and duties on air transport.................................................................................... 54 4. ENERGY .................................................................................................................................................... 59 4.1. Harmonization of taxes on electricity, natural gas and coal............................................................ 61 4.2. Extension of the energy efficiency programme ................................................................................. 62 4.3. Raising to 25 per cent the VAT rate applicable to artificial fertilizers............................................. 63 5. ENVIRONMENTAL LOAD FEES, ENVIRONMENTAL PRODUCT CHARGES AND MINING TAXES................. 64 5.1. Introduction of air load fee ............................................................................................................... 65 5.2. Introduction of water load fee........................................................................................................... 65 5.3. Introduction of soil load fee .............................................................................................................. 66 5.5. Increased mining taxes...................................................................................................................... 69 6. PROTECTION OF GREEN AREAS AND ARABLE LAND; TAXES PROMOTING ENVIRONMENTALLY FRIENDLY AGRICULTURE .................................................................................................................................. 71 6.1. Increased land protection fees .......................................................................................................... 72 6.2. Extended scope of land protection fees............................................................................................. 72 6.3. Environment-oriented taxes on agricultural production .................................................................. 72 6.4. Transformation of the agrarian subsidization system....................................................................... 73 6.5. Introduction of a charge on covering large areas ............................................................................ 73 3 ALTERNATIVE STATE BUDGET OF THE CZECH REPUBLIC FOR THE YEAR 2004, WITH A PERSPECTIVE UNTIL 2013 .....................................................................81 INTRODUCTION..............................................................................................................82 I. PROPOSAL FOR AN ALTERNATIVE STATE BUDGET – SUMMARY ............83 THE ALTERNATIVE BUDGET PROPOSAL IN BRIEF ..................................................................................... 85 II. RULES FOR MAKING AN ALTERNATIVE BUDGET ........................................92 III. THE STRUCTURE OF THE ALTERNATIVE PROPOSAL................................96 III.A THE INCOMES SIDE OF THE BUDGET ................................................................................................ 96 Environmental taxes – Raising the existing ones and introducing new ones .......................................... 96 A. Transport ............................................................................................................................................. 96 B. Energy and Heat ................................................................................................................................ 100 C. Raw Minerals Extraction and Imports .............................................................................................. 102 Summary of the Taxes: ........................................................................................................................... 103 Reducing labour costs ............................................................................................................................ 104 III.B THE EXPENDITURES SIDE OF THE BUDGET ...................................................................................