Taxing Pesticides

Ever since the Government's "grey" paper into Environmental Instruments in November 1997, a tax on the use of pesticides has been on the agenda. The conclusion drawn from officially commissioned research is that environmental damage is still being done from the use of pesticides which cannot be traced back to misuse or non-compliance with regulations. It is therefore said that "the existence of these residual environmental and health impacts provides a clear rationale for additional instruments to support the existing pesticide minimisation policy".

The Fiscal Option

The idea is to provide an incentive to the development of alternative methods of pest control by increasing the cost of pesticides, and relatively more so for the more hazardous ones.

The instrument currently under consideration is a "charge" based on a combination of weight and hazard potential. The latter element will be the more important and involves allocation into five bands.

The relationship between the bands has not yet been determined but may either be "arithmetic" or "geometric". Under the former, the same weight of pesticide in band five involves payment of a charge five times than for band one. Under the latter, it is 16 times higher.

The tax point will probably be "first sale or use", so that imports can be caught and exports exempted. The European legal prohibition on the taxation of imports as such is likely, however, to complicate the collection process.

What Of The Farmer?

According to official sources:

The end result for farmers is that a rate of "charge" intended to increase the price by 30 per cent will result in a cost increase to them which has been calculated, on two different "pass through scenarios", at either 50 per cent or 80 per cent, with the latter seeming more likely.

280 farms (two per cent of the total), many of them in the south east, will be put completely out of business.

There would be a loss of between 1,000 and 2,000 full time jobs.

Overall farm earnings would be reduced, long-term, between one per cent and two per cent. In the short-term the reduction has been estimated to be three per cent, as against 1996 figures (a year in which, it should be noted, farming was considerably more prosperous than it now is).

How Reliable Are These Estimates?

An examination of the methodology adopted to arrive at the estimate recorded in (b) above suggests that the effect on atypical mixes of farming has not be estimated with any degree of...