Consider climate in tax policy

Governments have no choice but to enforce environmentally friendly activities within their jurisdictions. A quick tool that all countries grab in this fight is taxes. Kenya has not been ignorant of the global crises; its tax laws are laced with eco-friendly initiatives. Importation of electric vehicles enjoys a 10 percent reduction in excise duty, there is a VAT exemption on the importation of solar power raw materials.

These, just to name but a few are laudable efforts. However, the need for environmentally friendly tax laws or green taxes needs to be more pronounced in Kenya’s fiscal framework. This idea comes at the most opportune time when the country is preparing its inaugural national taxation policy.

The national tax policy is to buttress every tax law made in the future and it’s therefore important to give prominence to the environment in that document.

Green taxes work in two ways, the first is discouraging activities that are unfriendly to the environment and the second way is incentivizing green initiatives. Discouraging harmful practices work on the polluter pay principle. Heavy taxes should be imposed on the use of equipment and substances with high carbon emissions.

Already there are heavy taxes on petroleum products. The East Africa Common external tariff has increased the duty on the importation of timber from 25 percent to 35 percent. More sectors that offend mother nature should be identified and put on the tax man’s guillotine.

The other face of eco-taxes is the use of tax incentives. The source of energy to power transport, industries, and homes sits at the center of the green gases debate. Energy from renewable sources should be encouraged and thus be granted tax incentives.

Electric vehicles are being touted as saviors to the universe, more incentives should flow in this direction. Most organizations use thermal generators as a source of backup power, which has to be discouraged instead alternatives from renewable sources should be installed.

Incentives should further be extended to eco-friendly assets used for businesses. For instance, the design of buildings should encourage maximum use of natural light, good ventilation, and water harvesting. KCB towers in upper hill is a good example. Such buildings should enjoy an accelerated rate of capital allowances.

Machinery used for reduction of environmental damage and disposal of waste enjoys capital allowances of 50%. There is much more pollution from residential areas, such an incentive should be extended to landlords for an eco-friendly solution to sewer problems.

Agriculture is the mainstay of our livelihoods but is a major polluter. According to the world bank’s report on smart agriculture, the sector contributes 29 percent of greenhouse gases.

Farm inputs, use of land and water, farm waste management, and harvest management should be looked at through the lens of environmental conservation. Tax policy should take center stage in what the World Bank dubs climate-smart agriculture.

The existing tax laws have made some strides towards a green planet, but more can be achieved if the national tax policy inculcates concern for the environment. We have this moment in our history when we are writing a law overarching all the tax laws.

It is a very beautiful proposal that seeks to introduce sustainability in tax laws. In this policy, the environmental agenda should be enshrined.