In general terms, taxation of any kind in Tunisia is characterized by the fact that it is applied everywhere at the same time, i.e. it is ubiquitous, except when it comes to the environment.
The Tunisian Institute for Competitiveness and Quantitative Studies (ITCEQ) has just underlined the importance of promoting environmental taxation, which, according to a report, is still insufficient to mobilize the public resources needed to finance Tunisia’s environmental and energy transition.
According to the document, entitled “Promoting environmental taxation”, environmental taxes represent an average of 1.4% of GDP over the period 2000-2021.
The share of these taxes in total tax revenue fell over the same period, with a slight recovery in 2010 and between 2015 and 2018, but this was not sustained. These taxes do not exceed 4.2% in 2021, compared to 7.2% in 2000 and an average of 5.2% over the whole period.
In addition, Tunisia’s fiscal expenditure on the environment, energy management and renewable energies remained “low”, not exceeding 25.3 million dinars in 2022, despite the relative importance of the incentives offered. This weakness could be explained by the sluggishness of environmental investments, according to the ITCEQ.
In any case, ‘the lack of environmental investment has not contributed to Tunisia’s sustainable competitiveness’. These factors explain why environmental taxation is ‘still in search of maturity’.
In order to develop it, the ITCEQ has recommended that the draft environmental code should include all environment-related tax texts in a specific chapter entitled ‘environmental taxation’, while simplifying the schemes themselves.
It also considered it essential to set up an integrated information system on environmental taxation. The aim is to fill in missing data, harmonize existing data and structure them according to the methodology used by international bodies.
Reviewing the measurement of certain taxes
It also stressed the need to review the measurement of certain taxes by linking them to environmental impacts, citing the example of the tax on imports of used engines and spare parts.
The 2014 Finance Act set this at TND 3/kg of the weight of the engine or spare part, then revised downwards to TND 1/kg in the Supplementary Finance Act for the same year, without providing any rational justification for the reduction of this tax or the basis on which it is set.
The ITCEQ proposes that this tax should be indexed not only on the weight of the engine, its cubic capacity and the type of fuel used, but also on the age of the engine: the age of the engine correlates with pollutant emissions.
With regard to the tax on energy products consumed, “Tunisia could choose between two exclusive scenarios that would allow a double dividend and avoid the problem of double taxation linked to the maintenance of the tax on exports.
Scenario 1 consists of continuing to apply this tax to all sectors, but basing it on the carbon footprint of energy products.”
In scenario 2, companies will continue to pay tax on the energy products they consume, but only on their sales to the domestic market. Companies exporting products subject to the border carbon adjustment mechanism will be exempt from this tax, but will pay a tax based on the carbon emissions associated with their production when exporting these products to the European Union.
For an environmental bonus-malus
The recommendations also include the introduction of an environmental bonus-malus system to encourage consumers to buy less polluting vehicles, to discourage the purchase of vehicles with high CO2 emissions and to encourage car manufacturers to develop more environmentally friendly technologies.
The Institute also stressed the importance of merging the Environmental Protection Fund and the Environmental Protection and Design Fund. Such a merger would bring greater transparency to the management of public finances, effectively consolidate resources and avoid the problem of one fund (the Pollution Prevention Fund) carrying over its balance from one year to the next when the other fund needs it. It would also make public action more effective, both in terms of program planning and implementation.
It is also important to “promote communication on the financing of the ecological transition, in particular through taxation”. Information campaigns should be launched to explain to the general public how these taxes contribute to the fight against climate change and to environmental protection in general.
The Institute concludes that the success of carbon taxes depends on the commitment of stakeholders. Without their support, ‘the introduction of the tax may face significant resistance’.
