"Year two" for French ecological tax reform

Government proposes broader pollution tax, countervailing cuts in employment costs

France is to make further steps towards instituting an ecological tax reform next year, environment minister Dominique Voynet announced yesterday. However, the ministry's draft budget for 2000 omits many of the details of how it will be achieved. Firm figures are due to be revealed later this year as part of a new social security law proposal, according to a ministry spokesperson.

As the government has already made clear, 2000 will see a further extension of France's generalised pollution tax (TGAP) to include new taxes on water pollution and agricultural pollution, no further details of which were available in yesterday's statement. According to a spokesperson, the TGAP raised about euros 290m (FFr1.9bn) in 1999, which is expected to rise to more than euros 457m next year.

In addition, next year will see the first in a planned series of countervailing cuts in taxes affecting employment - the programme's "second dividend" according to Ms Voynet. No further details are available on how large any tax cuts will be.

The TGAP was first introduced last year, grouping around 17 existing environmental taxes under one umbrella (ENDS Daily 23 July 1998). The government now plans to extend the range of these taxes and to progressively increase their level in an effort to incentivise cleaner production and products. Yesterday's draft budget reiterates that new taxes on energy products should be included in the TGAP in 2001 as first proposed in July (ENDS Daily 19 July).

Away from the TGAP, the 2000 draft budget marks another good year for the status of the environment ministry and the resources at the command of Ms Voynet. The ministry's budget is to rise by nearly 9%, having more than doubled in 1999. Staff numbers are also to be increased, both in the ministry and in related agencies. The budget of the French environment agency Ademe is to rise by 7% after a 40% increase in 1999.

One aspect of the budget particularly underlined by Ms Voynet is the planned creation of a new environmental economics section in the ministry. Funded to the tune of euros 1.5m, the department will be charged with evaluating government policies for their environmental sustainability.

Meanwhile, the French finance ministry has announced that diesel tax is to rise by euros 0.01 in 2000 for the second year running. The policy is aimed at closing a long-standing price differential between diesel and petrol branded by Ms Voynet as "anti-ecological" (ENDS Daily 25 August 1997).

Follow Up:
French environment ministry, tel: +33 1 42 19 20 21. References: The full text of the draft budget can be downloaded from the following PDF file: http://www.environnement.gouv.fr/telch/plf2000.pdf

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