The 4th Tax Workshop

The theme of the fourth edition of the Tax Workshop was the role of taxes and other fiscal instruments in the European Green Deal and the Fit for 55 package. High uncertainty concerning both the pandemic situation and the ability to organize workshops only in person meant that the first day, a seminar on “green taxes,” took place in a hybrid format, and the second, a discussion on the papers submitted, took place entirely online.

The climate catastrophe is becoming a fact that’s increasingly difficult to deny. One symptom of this is the change in the approach of key state institutions, which not long ago were questioning the harmfulness and unprofitability of coal extraction, and the influence on smog of the use of coal in home furnaces. And while for a large segment of society questions of environmental protection aren’t very significant, the political elites already know that this question cannot be ignored. All the more so as a strong signal has come from the European Commission: first the European Green Deal appeared, and after the pandemic crisis was shaken off, the ambitious Fit for 55 package arrived. But community awareness of the content of these programs, the tools for introducing them and their social consequences is very low. This motivated us to take up the subject, and in particular the role that can be played by fiscal instruments. As economists, we should attempt to achieve the essential goals for saving the climate at the lowest possible costs.

After the seminar was opened by Martin Dahl, dean of the Faculty of Economics and Management at Lazarski University, then CASE Vice President Jan Hagemejer took the floor, and the formal introduction concluded with comments from Witold Naturski, acting head of the European Commission Representation.

The first presentation was from Dr. Jarosław Neneman, who showed the role that can be played by taxes in the internalization of negative externalities. Taxes that do this are known as Pigovian taxes, and their purpose is not to raise revenue, but to send pricing signals so that consumers and producers take into account in their decisions the full social cost of production and consumption of goods and services. He also showed the structure of social costs of using cars, and addressed the level of excise tax, which covers less than half of them.

Next, Dr. hab. Michał Ptak showed the fiscal instruments applied in Poland and in other EU countries. The low tax on fuel is noteworthy; it is significantly lower even than the quite conservative estimates of CO₂ emissions costs proposed by Nordhaus. Against this backdrop we can see the high, and in some cases very high taxation of energy and energy products in Scandinavian countries.

The next speaker, Dr. Piotr Lewandowski, presented the results of analysis based on a macroeconomic model that considered three scenarios for compensating for the taxation of CO₂ emissions: compensation; compensation combined with a fixed tax refund; and designating funds from a carbon tax to reduce the cost of labor, according to the so-called double-dividend concept. This last method caused the smallest drop in GDP, but also had the greatest negative redistributive consequences. This is an important contribution to the discussion of how to minimize the social costs of restricting CO₂ emissions.

This portion of the seminar was concluded by a presentation from Robert Jeszke, who discussed the main elements of the Fit for 55 package and showed how they affect the European emissions trading system (ETS). In this context, the proposal to broaden this system to include transportation and housing is significant. The final part of the presentation was devoted to the carbon border adjustment mechanism, i.e. the tax on imports of selected goods with a large carbon footprint.

After the break, Dr. Maciej Grabowski discussed the question of the green budget in Poland. After showing the limitations on data sources, he presented estimates of public outlays that can be treated as “green,” and aggregated them.

Participants expressed great interest in the discussion panel led by Rafał Zasuń of the Wysokie Napięcie news portal. To open, Dr. Karolina Tetłak pointed out the significant procedural problems related to the introduction of the proposed solutions, including in particular the need to achieve unanimity on key decisions concerning fiscal instruments. In her opinion, the pace of proposed changes is too fast, and fails to sufficiently consider social costs.

Next the debate turned to on car transportation and the challenges that Fit for 55 poses for the automotive sector. These challenges were addressed by Jakub Faryś, who also pointed out the great danger of an inflow of old internal-combustion vehicles from Western Europe as it electrifies. Marcin Korolec had a positive view of electrification, pointing out that in the broader context, the changes proposed in the package may significantly contribute to an increase in innovation in the European economy.

Paweł Wróbel addressed the combination of energy-related sectors, i.e. electrification of the transportation sector and buildings based on renewable energy, which means emphasizing electric cars and heat pumps in buildings. He pointed out that the role of administration, including via shaping budget and fiscal policy, should be increasing opportunities for Polish economic entities to develop in the sectors of the future, and to make it possible that the beneficiaries of the changes won’t be only the most resourceful – those who can afford, financially and mentally, to make investment decisions that allow them to reduce their bills for electricity, heat and transportation. (And in fact, this is already possible thanks to solar panels, which provide green energy for both heat pumps and electric cars.)

Paweł Różycki pointed out the numerous difficult or in fact controversial proposals contained in the packages. Still, like most panelists, he is optimistic about the environmental consequences of EU climate policy.

In the final part of the seminar Deputy Minister Adam Guiborge-Czetwertyński took the floor, focusing on certain aspects of the border adjustment mechanism. In response to questions from participants, he attempted to dispel fears of negative consequences of this solution and attempts to evade it.

In his summary, seminar chairman Jarosław Neneman pointed to the low popular understanding of the need to take into account full environmental costs. Limiting consumption of meat or individual use of cars (particularly in cities), which is to be accomplished by making prices correspond to reality, doesn’t result from any ideology, despite the way some people see it. The key to success is thus on the one hand building awareness of the need for change, and on the other hand explaining the logic of applying particular instruments.

During the second day of the workshop, October 26, four papers were discussed online:

1. Adam Kędrzyński, University of Łódź, „Nadzwyczajne podatki majątkowe – właściwa odpowiedź na „popandemiczne” problemy fiskalne? Argumentów kilka z zakresu dziedziny historii gospodarczej” (Extraordinary weath taxes: the right answer to „post-pandemic” fiscal problems? A few arguments from economic history).
2. Paweł Strawiński, University of Warsaw, „Szacowanie luki CIT dla Polski 2012-2014 metoda od dołu do góry” (Estimating Poland’s 2021-2014 CIT gap using a bottom-up method).
3. Maria Urban, Lazarski University, „Wpływ z podatku od towarów i usług w kontekście zmienności przepisów ustawy o VAT” (VAT revenue in the context of regulatory volatility).
4. Anna Białek-Jaworska, University of Warsaw; Arkadiusz Bernal, Poznań University of Economics and Business, “Effects of non-deductible costs of unpaid liabilities on the days payable outstanding”.