Volatile Organic Compounds Tax (Switzerland)

Volatile Organic Compounds Tax, Switzerland

Background
The tax was introduced under the Environmental Protection Law and is indicative of the change occurring in Swiss environmental policy. Along with an incentive tax on extra-light heating oil, the taxes ‘aim to achieve efficient environmental protection by offering price-based financial incentives, and they supplement the traditional command and control instruments. Those who pay for the impact they have on the environment will try to decrease their financial burden and hence also reduce pollution.' (Swiss Agency for the Environment, Forests and Landscape, pp304). VOCs are used in many branches of industry (e.g. as solvents), and are present in many products such as paints, varnishes and cleaning agents. Under the effects of the sun's rays, VOC and nitrogen oxide emissions contribute to the excessive formation of ozone close to the earth's surface (summer smog) (Swiss Agency for the Environment, Forests and Landscape, pp304).

Introduced
It was due to be introduced on 1^st January 1999, and later postponed to January 2000. (ENDS, 2002)

Aims
To reduce emissions of VOCs. To achieve the minimum target of the Confederation's Air Pollution Control Strategy for VOC emissions (145,000 tonnes of VOCs per annum), emissions must be reduced by about 70,000 tonnes in relation to the 1995 figure. Without the incentive tax, the shortfall in the year 2000 would still amount to some 27,000 tonnes. (Swiss Agency for the Environment, Forests and Landscape, pp304). High levels of photochemical smog prompted the Swiss government to announce the tax.

Coverage
Levied by the Federal Customs Administration on imported Swiss-made VOCs (Swiss Agency for the Environment, Forests and Landscape, pp304).

Tax Rates
1999/2000 (1st stage): 1 Swiss franc/kilogram
2001/2002 (2nd stage): 2 Swiss francs/kilogram (approx. €1.40)
2003 (3rd stage): 3 Swiss francs/kilogram (Swiss Agency for the Environment, Forests and Landscape, pp305)

Refunds
The tax will be reimbursed for eliminated or exported VOCs. VOCs in products are exempt if they account for no more than three percent of the product. (Swiss Agency for the Environment, Forests and Landscape, pp304).

Exemptions
The Federal Council may grant partial exemption from the tax to companies that have already reduced VOC emissions well beyond the legal requirements (Swiss Agency for the Environment, Forests and Landscape, pp304).

Allocation of Revenues
Revenues from the incentive taxes on volatile organic compounds and extra-light heating oil are not earmarked for any specific purpose and are distributed among the population irrespective of income. (Swiss Agency for the Environment, Forests and Landscape, pp305). For cost reasons, the revenues will be distributed to the population by deducting it from their health insurance premiums. Compared with other distribution methods (Post Office payment slip, payment via the cantonal tax departments), payment through the health insurance schemes is the lowest-cost option. This does not mean that health insurance premiums are being subsidised. The insurer will serve merely as an administrative channel. To ensure transparency for the policy-holders, the sum to be deducted must be clearly specified on the invoice and/or premium notification. The revenues accruing from the tax in a particular year will be distributed the following year. (Swiss Agency for the Environment, Forests and Landscape, pp306)

Expectations (Ex ante Analysis)
Expected revenue of ‘90 million Swiss francs in the first stage, rising to 220 million Swiss francs after the introduction of the third stage.' (Swiss Agency for the Environment, Forests and Landscape, pp305).

Estimated revenues from taxes on VOCs and extra-light heating oil and their distribution:
Year
Annual Revenues
Per Capita Sum
1999/2000
Approx. 110 million Swiss francs
Approx. 15 Swiss francs
2001/2002
Approx. 180 million Swiss francs
Approx. 25 Swiss francs
From 2003
Approx. 230 million Swiss francs
Approx. 30 Swiss francs
(Swiss Agency for the Environment, Forests and Landscape, pp305)

Performance
Since 1985, there has been a 37% reduction in VOC emissions (OECD, ?
In 2002, Swiss businesses argued for an abolition of the tax on the basis that the targets had been reached (total emissions of only 40-55,000 tonnes in 2001). However, the government rejected these figures saying that some larger emitters are exempt because of the improvements they have made.

Related Instruments
Implemented at a similar time to the tax on extra-light heating oil.

References
Swiss Agency for the Environment, Forests and Landscape, The Environment in Switzerland: 31 Economic Instruments, pp304-306)
ENDS, 2002. Businesses speak up against Swiss VOC tax. Issue 1211, 7 May 2002.

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Volatile Organic Compounds Tax, Switzerland

Background

The tax was introduced under the Environmental Protection Law and is indicative of the change occurring in Swiss environmental policy. Along with an incentive tax on extra-light heating oil, the taxes ‘aim to achieve efficient environmental protection by offering price-based financial incentives, and they supplement the traditional command and control instruments. Those who pay for the impact they have on the environment will try to decrease their financial burden and hence also reduce pollution.' (Swiss Agency for the Environment, Forests and Landscape, pp304). VOCs are used in many branches of industry (e.g. as solvents), and are present in many products such as paints, varnishes and cleaning agents. Under the effects of the sun's rays, VOC and nitrogen oxide emissions contribute to the excessive formation of ozone close to the earth's surface (summer smog) (Swiss Agency for the Environment, Forests and Landscape, pp304).

Introduced

It was due to be introduced on 1^st January 1999, and later postponed to January 2000. (ENDS, 2002)

Aims

To reduce emissions of VOCs. To achieve the minimum target of the Confederation's Air Pollution Control Strategy for VOC emissions (145,000 tonnes of VOCs per annum), emissions must be reduced by about 70,000 tonnes in relation to the 1995 figure. Without the incentive tax, the shortfall in the year 2000 would still amount to some 27,000 tonnes. (Swiss Agency for the Environment, Forests and Landscape, pp304). High levels of photochemical smog prompted the Swiss government to announce the tax.

Coverage

Levied by the Federal Customs Administration on imported Swiss-made VOCs (Swiss Agency for the Environment, Forests and Landscape, pp304).

Tax Rates

1999/2000 (1st stage): 1 Swiss franc/kilogram

2001/2002 (2nd stage): 2 Swiss francs/kilogram (approx. €1.40)

2003 (3rd stage): 3 Swiss francs/kilogram (Swiss Agency for the Environment, Forests and Landscape, pp305)

Refunds

The tax will be reimbursed for eliminated or exported VOCs. VOCs in products are exempt if they account for no more than three percent of the product. (Swiss Agency for the Environment, Forests and Landscape, pp304).

Exemptions

The Federal Council may grant partial exemption from the tax to companies that have already reduced VOC emissions well beyond the legal requirements (Swiss Agency for the Environment, Forests and Landscape, pp304).

Allocation of Revenues

Revenues from the incentive taxes on volatile organic compounds and extra-light heating oil are not earmarked for any specific purpose and are distributed among the population irrespective of income. (Swiss Agency for the Environment, Forests and Landscape, pp305). For cost reasons, the revenues will be distributed to the population by deducting it from their health insurance premiums. Compared with other distribution methods (Post Office payment slip, payment via the cantonal tax departments), payment through the health insurance schemes is the lowest-cost option. This does not mean that health insurance premiums are being subsidised. The insurer will serve merely as an administrative channel. To ensure transparency for the policy-holders, the sum to be deducted must be clearly specified on the invoice and/or premium notification. The revenues accruing from the tax in a particular year will be distributed the following year. (Swiss Agency for the Environment, Forests and Landscape, pp306)

Expectations (Ex ante Analysis)

Expected revenue of ‘90 million Swiss francs in the first stage, rising to 220 million Swiss francs after the introduction of the third stage.' (Swiss Agency for the Environment, Forests and Landscape, pp305).

Estimated revenues from taxes on VOCs and extra-light heating oil and their distribution:

Year	Annual Revenues	Per Capita Sum
1999/2000	Approx. 110 million Swiss francs	Approx. 15 Swiss francs
2001/2002	Approx. 180 million Swiss francs	Approx. 25 Swiss francs
From 2003	Approx. 230 million Swiss francs	Approx. 30 Swiss francs

(Swiss Agency for the Environment, Forests and Landscape, pp305)

Performance

Since 1985, there has been a 37% reduction in VOC emissions (OECD, ?

In 2002, Swiss businesses argued for an abolition of the tax on the basis that the targets had been reached (total emissions of only 40-55,000 tonnes in 2001). However, the government rejected these figures saying that some larger emitters are exempt because of the improvements they have made.

Related Instruments

Implemented at a similar time to the tax on extra-light heating oil.

References

Swiss Agency for the Environment, Forests and Landscape, The Environment in Switzerland: 31 Economic Instruments, pp304-306)

ENDS, 2002. Businesses speak up against Swiss VOC tax. Issue 1211, 7 May 2002.