Excise Taxation To Preserve Health and To Protect the Environment: A Review

• Published in: Canadian tax journal Vol. 70; no. Supp; pp. 159 - 184
• Main Author: Cnossen, Sijbren
• Format: Journal Article
• Language: English
• Published: Toronto Canadian Tax Foundation 2022
• Subjects: Alcohol; Consumption; Costs; Developing countries; Economic development; Economic growth; Excise taxes; Externality; Fiscal policy; GDP; Gross Domestic Product; Income taxes; LDCs; Leisure; Tax increases; Tax rates; Tax revenues; Taxation; Tobacco
• ISSN: 0008-5111; 0008-5111
• DOI: 10.32721/ctj.2022.70.supp.cnossen

Excise duties continue to be coveted sources of revenue, particularly in developing countries, because they are easy to collect and cause few economic distortions. In developed economies, on the other hand, excise duties are increasingly considered useful instruments for enhancing social and market outcomes by internalizing the financial, physical, and psychological costs that abusive consumers and producers impose on other people (that is, external costs) and, unintentionally, on themselves (that is, internal costs). By internalizing these costs in the price of goods and thereby confronting consumers with the true cost of consumption, excise duties on tobacco, alcohol, sugar, and gambling can induce these consumers to preserve the quality of their health. Similarly, excise duties on carbon, cement, transport, and plastics can correct for the human-induced degradation of the environment. In this paper, the author identifies the revenue-raising and externality- and internality-correcting features of excise taxation and reviews, in this context, some of the main developments and issues encountered in subjecting particular excisable goods and services to excise taxation.