Environmental Taxation: Ukrainian Realities and European Practice

NADIIA DAVYDENKO1, ZOIA TITENKO1, KATERYNA SHEVCHUK2,

ALINA BURIAK1

1Department of Finance, National University of Life and Environmental Sciences,

Kyiv, UKRAINE

Kyiv, UKRAINE

environmental taxation in Ukraine. In modern economic conditions the issue of restoration of natural resources

and redistribution of environmental tax between the relevant budgets is becoming increasingly important.

Environmental taxes as a tool of environmental policy should not just fill the state budget, but stimulate the

payer to have a positive and responsible attitude towards the natural environment. The funds received can be

used to stimulate environmental protection, state programs for the development and import of resource-saving

technologies, waste disposal, etc. Reserves for reducing the load on the surrounding natural environment can be

quickly exhausted, therefore it is important to find ways to give economic growth a new quality, so that the

recovery of the economy and the growth of industrial production are accompanied by the introduction of

effective environmental protection technologies. As a result of the study, the main types of environmental taxes

are identified. It is established that the ecological tax is an important lever for counteracting negative changes in

Received: June 21, 2022. Revised: October 17, 2022. Accepted: November 13, 2022. Published: December 13, 2022.

1 Introduction

In modern conditions, the state of the environment

and the exhaustion of natural resources are problems

that require urgent solutions both in Ukraine and in

the whole world. This is primarily due to the lack of

financial resources needed to implement

among the first to intensively use tax instruments to

stimulate environmental measures since the 80-90s

of the twentieth century. The European Union has

adopted a number of basic directives that set

minimum energy tax rates and introduce a system of

quotas for greenhouse gas emissions. Environmental

issues are still relevant in Europe, and there is

constant talk of increasing tax pressure to protect the

environment.

Taking into account the practice of developed

2 Analysis of the Latest Research and

Publications

Substantial changes in environmental taxation, in

order to solve the priority issues of environmental

protection, require the establishment of a process of

effective management, by introducing a variety of

their types and analyzing the results of their

implementation. Issues that are urgent for Ukraine,

regarding environmental taxation, are almost

conditions of Ukraine.

For the first time, studies of the problems of

environmental taxation are found in the writings of

A. Pigou, he first defined environmental costs and

formulated an understanding of the need to

introduce a tax that would compensate for the losses

of society and contribute to the restoration of the

ecological situation [19]. Followers of Pigou's

teachings, in particular G. Tullock and P. Ekins [9],

[25], claim in their research that environmental

external effects, including in the form of ecological

damage to the environment, and compensation in

the form of subsidies for entities that improve the

environment [1], [6].

Many studies of domestic and foreign scientists

have been devoted to the issue of efficiency and

optimality of environmental taxation in the tax

system. In particular, researchers [3], [7], [13] in

their studies claim that the optimal tax rate for

emissions of polluting substances should be lower

elasticity of demand is low, the impact on the

environment can be very small, even with a high tax

rate [16], [21]. It is important to note the

contribution of scientists [14], [20], [22] who

studied the reform of environmental taxation in the

devoted to the work of I.S. Varlamova [26], O.O.

Veklicha [27], O.N. Garkushenko [11]. Quite

important are the works of scientists devoted to the

issues of the role of environmental taxation in the

possibility of practical implementation of effective

environmental taxation [15], [28].

Despite a wide range of studies, many problems

remain unresolved and require constant monitoring

environmental taxation in order to preserve the

environment, is timely and relevant.

The purpose of the article is to study the theoretical

and practical foundations of environmental taxation

in Ukraine and develop proposals for its

improvement, taking into account global trends.

The methodological basis of the research is a

systematic approach to determining the main

provisions of the theory of environmental taxation

as one of the determining factors for the efficiency

country.

significant role in creating alternative sources of

financing for environmental protection activities in

Ukraine.

Analysis of foreign experience shows that the

introduction of an effective tax mechanism,

simultaneously with increasing the requirements for

environmental standards, plays a leading role in

improving the condition of natural objects.

The history of the formation of environmental

taxation in the world is quite long. For the first time,

the idea of environmental taxation was highlighted

in the works of A. K. Pigu, who proposed to

consider taxes as a tool for influencing the behavior

of "pollutants" of the environment, on the one hand,

and as an incentive to environmental activities

elements of the environment.

Environmental taxation is one of the decisive factors

for rational use of natural resources. A prerequisite

for the introduction of environmental taxes was to

provide compensation for environmental pollution,

in particular, to establish a direct relationship

leading countries of the world, environmental

taxation performs three main functions:

environmental, incentive and fiscal. In Ukraine,

however, the role of environmental taxes is limited

only to ensuring the fiscal sufficiency of the system

of collecting payments for environmental pollution

[2], [5].

If we talk about the economic essence of an

environmental tax, then it should be understood as

This compensation is obliged to fully finance the

activities that are necessary for the restoration of the

surrounding natural environment. However, the

value of this tax implies that there is no negative

impact on the environment. If in the EU countries,

this tax performs its main functions, then in Ukraine

and Ukraine has significant differences. So, in

European countries, the environmental tax includes:

1) energy taxes-responsible for 3/4 of revenues from

environmental taxes;

2) transport taxes account for 1/5 of revenues;

3) taxes on pollution and taxes on the use of Natural

Resources – Account for only 3% of revenues from

A comparative analysis of environmental tax

revenues in the EU and Ukraine shows that the

share of this tax in Ukraine is rather insignificant

and during the study period amounted to less than

1% of GDP (fig. 2).

When analyzing the effectiveness of environmental

taxation, it is important to analyze the ratio of

revenues from this tax and expenses for the

is, we can conclude that Ukraine does not pay

enough attention to the collection of this tax and

environmental problems in general (Fig. 4)

The conducted studies clearly show that in Ukraine,

spending on environmental protection is ten times

lower than in European countries and their share in

GDP is very insignificant during the study period

and tends to decrease. So, in 2012 they amounted to

0.4% of GDP, and in 2019 they decreased to 0.27%.

The pan-European indicator has an almost

unchanged trend and ranges from 1.9-2% of GDP.

environmental protection measures. It is worth

noting that the European experience of

environmental taxation testifies to its effectiveness,

in particular, its high tax rates force enterprises to

implement measures aimed at minimizing

environmental pollution. A comparative analysis of

environmental tax collection in Ukraine and the EU

has demonstrated low fiscal efficiency in Ukraine.

In addition, our country does not pay enough

attention to the administration of this tax and

consider the environmental tax as one of the main

sources of their financing. By introducing

appropriate changes to the tax legislation, it is

possible to solve a number of environmental

problems with the least losses for the country's

economy.

The conducted studies indicate the need to take

additional measures to demonstrate the dynamic

effectiveness of the environmental tax, in particular,

the use of other tax and administrative tools in

conjunction with this tax to increase the

Thus, it is possible to draw conclusions about the

significant transaction costs for the implementation

of the tax obligation by all participants in the tax

process and their insignificant fiscal potential. The

conducted study of the effectiveness of pollution

taxes proved that only static effectiveness is

manifested from their application. Considering the

administrative tools to increase the attractiveness of

implementing environmental innovations for

economic agents.

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