Abstract
It is a well-known fact that the automotive sector plays a key role in a country's socio-economic development, due to the large contribution of vehicles to greenhouse gas emissions (GHG). Alternatives such as car-sharing, public transport, cycling, the transition to electric vehicles, or walking can help reduce emissions. Therefore, it becomes a sector where environmental regulation should be demanded. This research aims to contribute to the tax literature by extending previous studies on corporate taxation by evaluating green tax incentives as an effective environmental tax measure. Considering taxis as an important part of urban public transport systems, the authors set out to investigate Portuguese taxi companies that have taken advantage of tax incentives for less environmentally polluting vehicles. The authors conclude that the income tax level, the economic profit, and the number of employees, are determining factors in these firms ‘access to the tax incentives under study.
TopIntroduction
Fast economic development is unequivocally associated with excessive energy consumption, especially in emerging economies, being, as a result, a high risk of environmental damage (Ekins & Zenghelis, 2021).
In this context, environmental sustainability must be the basis for current government action. Sustainable development strategies focusing on energy emissions and reducing greenhouse gas emissions (GHG) to achieve climate neutrality are seen as key policies for a sustainable climate agenda in the European Union (EU), as stated by Panarello & Gatto (2023) and Akdag & Yıldırım (2020). And in the Organization for Economic Co-operation and Development (OECD) countries under the OECD International Program for Action on Climate (IPAC), which support country progress towards net-zero greenhouse gas (GHG) emissions and a more resilient economy by 2050.
It is noted that the transport sector is widely recognized globally as a significant and growing source of air pollution (Williams & Blyth, 2023). It represents an excessive source of pollution, currently producing around a quarter of Europe's GHG emissions, and 33% of total urban GHG emissions in major cities are caused by transport (OECD, 2020). Thus, each country must start aligning its public policies to reduce GHG emissions caused by transport and achieve sustainable carbon neutrality (Kazancoglu et al., 2021; Xu et al., 2020).
This is where environmental taxation comes in. Green taxation, as it is also referred to, includes taxes on energy, transport, and pollution, and can generate, if correctly applied, a significant environmental impact on a particular country (Mosquera- Valderrama & Balharová, 2021; Oliveira & Mendes, 2017).
At this time, the relationship between environmental policy and tax policy is seen by governments as an opportunity to adjust the tax system to a more energy-efficient economy in the use of resources, making it innovative, with low carbon emissions, and more sustainable (Delgado et al., 2022; Han & Lee, 2022).
Taxis [in this study, the authors consider taxi companies to be those engaged in the rental of passenger transport] are a significant part of urban public transportation systems in addition to their advantages over other types of mobility, also considering their comfort and commodity (Qiu et al., 2022). Therefore, the replacement of taxis powered by conventional fuels with electric/hybrid vehicles is essential. To this extent, and in the case of the taxi sector, the Portuguese tax system provides tax incentives, namely for vehicles that are equipped with hybrid engines, plug-in hybrid engines, or that use exclusively natural gas or electric power. The authors set out to investigate Portuguese taxi companies that have accessed tax incentives for less environmentally polluting vehicles.
This chapter intends to contribute to the tax literature by extending previous studies on corporate taxation evaluating green tax incentives as an effective tax environmental measure. The main objectives of this chapter are: (i) to highlight the importance of green taxation for environmental protection; (ii) to bring to the climate change discussion the role of tax incentives for the transport sector; (iii) to study the Portuguese taxi companies that have accessed tax incentives for less-polluting cars.
Key Terms in this Chapter
Greenhouse Gas Emissions (GHG): A term to describe a gas that absorbs and emits radiant energy within the thermal infrared range, causing the greenhouse effect. Carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3) are the most important greenhouse gases.
Green Taxation: Environmental or green taxes include taxes on energy, transport, pollution, and resources. It is seen by governments as an opportunity to adapt the tax system to a more energy-efficient economy in the use of resources, making it innovative, low-carbon, and more sustainable. It can take the form of tax incentives.
Climate-Neutral Impact: By 2050, to reach the point of net zero emissions, countries must dramatically reduce their greenhouse gas emissions and find ways to offset remaining and unavoidable emissions.
Environmental Sustainability: The ability to maintain the ecological balance of our planet's natural environment and conserve natural resources to support the well-being of present and future generations.
Taxi: A motor vehicle licensed to transport passengers in return for payment of a fare and typically fitted with a taximeter.
Hybrid Electric-Petroleum Vehicles: Vehicles powered by an internal combustion engine and one or more electric motors, which use energy stored in batteries.
Tax Incentives: Concessions in the tax codes whose extra-fiscal purpose overlaps tax revenues and represent a deliberate loss of government budget revenues.
Sustainable City: A city that has been able to introduce greenery into the urban environment to reduce CO2 emissions and improve air quality, has promoted renewable energy to conserve and protect natural resources, and has successfully implemented sustainable mobility and the use of public transportation.
All-Electric Vehicles: Vehicles that have an electric motor instead of an internal combustion engine, vehicles also referred to as battery electric vehicles (BEVs).