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Jersey Mulls Environmental Tax

by Amanda Banks,, London

02 March 2007

Proposals to introduce an environmental tax in Jersey have been published in a new public consultation by the Minister for Treasury and Resources, Senator Terry Le Sueur, and the Minister for Planning and Environment, Senator Freddie Cohen.

In 2005 the States debate on fiscal reform required the Treasury Minister to bring forward proposals for environmental taxes. The States Strategic Plan further endorsed this action. This States decision suggested possible additional taxes on the ownership and use of motor vehicles, on the production and disposal of waste and on the consumption of energy.

The fiscal debate decided that Jersey should have a goods and services tax and it was always understood that the existing tax on the purchase of motor vehicles – Vehicle Registration Duty (VRD) - would then be replaced by a form of environmental tax to raise an equivalent sum.

Since then a range of possible environmental taxes have been considered and the extensive research suggests that the environmental tax which would best suit Jersey as a first step would be a Vehicle Emissions Duty (VED).

The income from VED is expected to be GBP7.5 million in the first year and this will increase over four years to produce revenue of GBP10 million. As the new VED will replace the existing VRD the first GBP4 million raised each year will be used as the replacement income for VRD. The rest will be used to fund schemes which will bring environmental benefit to Jersey.

The VED model described in the consultation paper means there would be little or no tax on low-polluting vehicles and much higher taxes on those with high emissions. The proposals are a joint initiative from Le Sueur and Cohen.

Commenting, Le Sueur noted: “After replacing the GBP4 million revenue lost by removing VRD all the proceeds of the tax will be used to fund environmental improvements across the Island by creating environmental funding worth up to GBP6 million per annum by 2012. This will give an opportunity which Jersey has never had before to agree and prioritise initiatives to achieve real environmental improvements which will benefit everyone in Jersey and safeguard our heritage for future generations."

Cohen added: "The States has announced its commitment to taking responsible action to support the environment and this is an opportunity for Islanders to indicate whether they are prepared to play their part. I believe that people in Jersey are prepared to do their bit – the success of ECO-ACTIVE and the feedback we have had from public surveys shows that. Here we have a real opportunity to have a source of revenue which will fund environmental initiatives. It is my vision that we will ensure that damaging behaviours should be penalised and those who want to behave responsibly should be supported."

The paper examines various options for environmental taxes that could be levied on waste production, transport and energy use but concludes that the most appropriate tax to begin with is a tax relating to vehicle emissions – Vehicle Emissions Duty (VED). As this is still at the consultation stage the tax design is not complete.

It is likely that a VED would be an annual charge levied according to the carbon dioxide emissions specified by the manufacturer for each vehicle. The most polluting and inefficient would be penalised most while cleaner vehicles with low emissions who would pay little or no annual charge. A similar tax exists in the UK and other European countries.

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