Water taxation and the double dividend hypothesis
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Date
2015
Journal Title
Journal ISSN
Volume Title
Publisher
Water Resources and Economics
Abstract
The double dividend hypothesis contends that tax policies which
are aimed at protecting the environment can potentially yield
other benefits for the economy. However, empirical evidence of
the potential impacts of environmental taxation in developing
countries is still limited. This may be partly due to the limited use
of environmental tax policies in economic and environmental
management in many of these countries. This paper seeks to
contribute to the literature by exploring the impact of a water tax
in a developing country context, with Uganda as a case study.
Policy makers in Uganda are exploring ways of raising revenue by
taxing environmental goods such as water. Whereas their primary
focus is to raise revenue, this study is aimed at demonstrating how
taxes on environmental goods can potentially yield other benefits
beyond addressing a country's fiscal needs.
This study employs a computable general equilibrium model to
shed light on the impact of a water tax policy when a tax is
accompanied by a plough-back scheme of the same magnitude.
We seek to establish whether a water tax policy that is accom-
panied by a revenue plough-back scheme can induce more growth,
employment and industry output. Whatever the degree of
regressivity resulting from the tax, it is possible to design a policy
that benefits the economy. The policy was also checked for
sustainability using a long-run water demand scenario. The results
show that water demand remains more or less on the same
trajectory and in fact, a higher level of dividends is realized.
Description
Keywords
Environmental tax, Revenue plough-back, Double dividend, Economic growth
Citation
Kilimani, N., van Heerden, J., & Bohlmann, H. (2015). Water taxation and the double dividend hypothesis. Water Resources and Economics, 10, 68-91. http://dx.doi.org/10.1016/j.wre.2015.03.001