We suggest that when individual ministries are able to add differentiated green taxation on top of traditional taxation, this leads to over-taxation for two reasons. First, budget maximisation leads to overwhelming fiscal pressure because bureaucracies are competing for resources just like fishermen or hunters (here named "bureaucratic tax-seeking"). Second, the absence of a strong and fully informed troop leader prevents rational coordination of collective action. Taxing citizens or firms is then like harvesting rents from a natural resource and therefore we apply a common-pool resource model. These suggestions are confirmed by the case of the Danish waste tax with its fixed price approach and perverse incentives compared to that of achieving environmental target levels in a cost-minimising way. Thus, we recommend that bureaucratic institutions should coordinate their tax-seeking efforts to maximise budgets in the long run and that the ministries that collect green tax revenues should not be allowed to control these revenues. Furthermore, our results dictate that postulated effects from green tax intervention need to be demonstrated.
Energy and Environment, 2002, Vol 13, Issue 3, p. 355-66
bureaucratic tax-seeking; waste tax; common-pool resource model; green taxation