With an environmental financial reform, we are using fiscal policy and taxation to redirect towards a sustainable and fair economy and society - by reducing subsidies that harm the environment and society, by placing our tax system on a broader basis and by making the consumption of resources and the burden on the climate more expensive. The additional revenue should be used sustainably for investments in the future and social justice.
Options for promoting Environmental Fiscal Reform in EC Development Cooperation
Contrary to the other countries in this report, is an upper-middle income country with a GDP per capita of US$89,330. Overall, preconditions for an EFR are quite good in Barbados, not at least since several measures were taken to reduce other more distorting taxes such as on personal income and corporations.Awareness of environmental concerns is fairly high in Barbados in comparison with other Latin American and Caribbean countries. A fair amount of EFR elements are already being implemented in Barbados especially in the transport sector and through an environmental levy. Nevertheless, experience in Barbados with EFR-elements (like in entire Latin America and the Caribbean) is still limited so far. The chance of linking tax reductions of ordinary taxes with higher taxes on environmentally harmful behaviour has not been used to the degree possible yet and deserves intensive studying. The ratio of government revenue to GDP has been at 34.9% in 2008 and very stable over the past years. Direct taxes contributed 42 per cent of total tax revenue in 2008, whereas indirect taxes contributed 57 per cent. The large contribution of indirect taxes to overall tax revenue is mainly based on the large contribution of the value-added tax to public revenue, which amounted to a share of 34 per cent in 2008. Additional and increased environmental taxes could be introduced especially in the energy sector and on fuel. For road and water supply infrastructure there is a need to further strengthen the cost-recovery principle. Additionally, land and property taxation could be reformed to exert additional environmental steering effects.