Global

Details

  • Service: Tax
  • Type: Survey report
  • Date: 4/25/2013

Pollution control & ecosystem protection 

This section of the KPMG Green Tax Index reviews how national governments are using their tax systems to penalize polluting activities or to incentivize the reduction of pollution or the protection of ecosystems.
POLLUTION CONTROL & ECOSYSTEM PROTECTION
Singapore 1
Spain 2
France, Mexico, South Africa, UK, US 3

Source: The KPMG Green Tax Index, 2013.


It is important to note that many countries have environmental agencies that monitor the impact of industry on the environment, issue licenses and impose fines for contraventions. The Index does not consider such fines for the purposes of this Index but limits its review specifically to tax-based penalties and incentives.


Nine of the 21 countries analyzed are notable for having some form of tax instruments in place related to pollution control and ecosystem protection. Over half of these countries are located in Europe. Most of the tax mechanisms these governments have in place are incentives to encourage the purchase of equipment to reduce pollution or incentives to encourage businesses to rehabilitate contaminated land.


However, France stands out for enacting tax-based penalties on pollution.




Singapore

Singapore has two significant tax incentives that relate to ecosystem conservation. In 2010, Singapore introduced the Land Intensification Allowance (LIA) incentive, a scheme to promote more efficient use of industrial land, encouraging brownfield rather than greenfield development. The LIA provides an initial tax allowance of 25 percent and annual tax allowance of 5 percent on qualifying capital expenditure on the construction, renovation or extension of industrial buildings.


Businesses in Singapore can also claim a one-year accelerated capital allowance for approved pollution control equipment.


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Spain

Spain offers a Corporate Income Tax credit (Article 39) for investments in fixed assets whose purpose is to protect the environment. Qualifying assets include facilities to avoid air, noise or water pollution from industrial installations. The tax credit amount is 8 percent of qualifying investments.


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France

France imposes a general tax on polluting activities (Taxe Générale sur les Activités Polluantes or TGAP) on a “pay as you pollute” basis. The original tax, enacted in 1999, covered the disposal of waste, atmospheric industrial pollution and air traffic noise. It was extended in 2000 to cover washing products and insecticide products for agricultural use, among others. As from 1 January 2014 the tax will apply to single-use bags provided in stores. The tax is levied per ton of polluting substance produced or processed.


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Mexico

Investments in equipment to control or prevent environmental pollution can qualify for an immediate 100 percent deduction.


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South Africa

South Africa has a sector specific tax incentive for the mining sector. Mining companies are obligated to rehabilitate land after the conclusion of mining activities and must set up a trust to fund the rehabilitation. Contributions to these trusts are fully tax deductible.


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UK

In the UK, companies can claim Land Remediation Relief: a deduction of 100 percent, plus an additional deduction of 50 percent, for qualifying expenditure incurred by companies in rehabilitating land acquired from a third party in a contaminated state.


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US

US companies can choose to write off certain certified pollution control assets over a period of time, between 60 and 84 months depending on the type of facility. This allowance is one of the few incentives in the US tax code with no expiration date, however facilities must be certified in order to take advantage of the incentive.


In the US, there are also a large number of sub-national state-based tax incentives related to pollution control and ecosystem protection. For example, North Carolina’s Conservation Tax Credit Program is an incentive for private landowners, including corporations, to voluntarily donate land for conservation. The tax credit is equal to 25 percent of the fair market value of the property donated and limited to USD500,000 for corporations.


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Non-tax incentives

Singapore’s Innovation for Environment Sustainability (IES) Fund provides funding of SGD2 million (USD1.6 million) per project to qualifying Singaporean companies that undertake environmental protection and public health related projects that contribute to the long-term environmental sustainability of Singapore. Focus areas for the fund include pollution control solutions for air, water, noise, hazardous substances and toxic industrial waste.



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More information on the KPMG Green Tax Index