Pesticide Taxation

The 2006 EU thematic strategy on the sustainable use of pesticides says ‘’taxation should be investigated further in order to establish a ‘banded’ taxation system as a proxy for true externalities in the future’’. The implementation, through Directive 2009/128/EC ,The Sustainable Use Directive of Pesticides, highlights that ‘economic instruments can play a crucial role in the achievement of objectives relating to the sustainable use of pesticides. The use of such instruments at the appropriate level should therefore be encouraged while stressing that individual Member States can decide on their use without prejudice to the applicability of the State aid rules.’

Certain Member States within the European Union are still offering farmers a lower VAT level for the use of pesticides, see table below, despite their increased cost to public health and environment. Lower VAT rates for pesticides represent an environmentally harmful indirect subsidy.

The Scandinavian countries have a long tradition in the taxation of pesticides. In July 2013, Denmark introduced a pesticide tax, where taxation is not linked to the nominal value of the insecticides, but linked to their environmental and health toxicity. Also Norway has a pesticide tax, while Sweden argues that they prefer banning active substances rather than taxing them, an argument difficult to contradict. A few other actors have decided to experiment with various forms of pesticide taxation:

  • Germany: Initiative to introduce a risk-based pesticide tax

Since 2001, domestic use of pesticides in Germany has increased by almost a third while the area of treatable land has remained largely unchanged. In addition, the 2015 targets for water protection are not being met.

PAN Europe members PAN Germany expressly welcome the initiative taken by Dr. Robert Habeck, the Minister of Agriculture for Schleswig-Holstein, to introduce a pesticide tax. The rationale behind the introduction of a risk-based tax on pesticides is that pesticides should not only be more expensive to account for the harm they cause to the environment, but that the tax should be levied in such a way that products which constitute a higher health risk are more heavily taxed. This would mean that the least harmful products would become comparatively cheaper and thus more attractive and that harmful products would be replaced by less harmful alternatives. The tax revenue could then be used for specific purposes.

PAN Germany has been calling for the introduction of a pesticide tax in Germany for many years and hopes that the proposed concept will be further fleshed out and implemented to ensure that non-chemical methods of weed and pest control will be used more frequently and that pesticide producers and the biggest polluters, not the general public, bear the costs of pesticide use.

  • The Danish pesticide tax

In 2013 the former Danish Government launched a campaign to reduce the pesticide load by 40% by 2015 from the 2011 load level. The plan has just been prolonged until the end of 2016. The main reasons for reducing pesticide use are to ensure a clean environment, good ecological conditions in nature, healthy food, better health and safety at work as well as more green workplaces. The goal is based on a new indicator, the Pesticide Load Indicator (PLI), as there is no target set for treatment frequency index (TFI) as earlier.

Where the TFI mainly reflects the intensity of pesticide use, the PLI is an indicator of the load on the environment and human health resulting from the actual use (sales) of pesticides. The main instrument is the pesticide tax, which in 2013 was increased and differentiated according the load indicator. The pesticides causing the highest load will thus be the most expensive, and will encourage users of pesticides to comply with the integrated pest management - IPM principles (Art 14, annex III Dir. 128/2009), to use fewer pesticides and to use the pesticides causing lowest load.

The tax is differentiated according to indicators of relative health and environmental impacts of the different pesticides. Effective from July 1 2013, the law is differentiating the tax on approved pesticides; the tax is paid on pesticides according to how large the impacts from the pesticides are on health, nature, and groundwater.

PAN Europe has created a database on best practice in pesticide taxation, providing an overview of different pesticide taxation schemes.

Frank Berendse, Emeritus professor at the University of Wageningen, suggests in his article in ‘Nature’ magazine to fundamentally reform the new Common agricultural Policy as from 2020 to be able to ensure the future of  European Agriculture and nature. He recommends a new progressive tax on artificial fertilizers, pesticides and imported fodder, charged per surface unit of land. Berendse suggests to include this taxes in a third pillar of the CAP. He further concludes that this will make the CAP more balanced, because farmers who provide societal services will be rewarded for their efforts (like cutting hedges) and the polluter will have to pay and also thi will lead to remarkable, price driven changes in the selling of sustainable products. Eventually, this will make healthy and ‘clean’ food available for every European.

Taxation or Rural Development Funding?

Many Member States are offering rural development funding to farmers to encourage them to introduce crop-specific integrated pest management, and as a result reduce pesticide use. So while some MS are taking a stick approach towards pesticides use reductions (applying pesticide taxations) others are taking a carrot approach (offering more EU funding through rural development).

PAN Europe has been discussing how to reduce pesticide-use through taxation. While PAN Europe’s members all agree on the need to eliminate reduced VAT levels, our members are divided as to whether pesticide taxation (the stick approach) or more funding on rural development (the carrot approach) is the way forward. Often it is members in the new MS where CAP support levels are still being phased in who are reluctant to introduce taxation.

As a result we – together with our members and other Brussels based NGOs– will work together so that the low VAT on pesticides is stopped, in some MS we will work for introduction of a pesticide tax, while in others working for development of solid rural development measures.

This conversation helps come closer to reaching the objectives from the Communication of the Roadmap to a Resource Efficient Europe: to reduce resource inputs in food production by 20% by 2020 (page 18), and sets specific targets on introduction of environmental taxes (page 11).

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PAN Europe gratefully acknowledges the financial support from the European Union, European Commission, DG Environment, Life+ programme. Sole responsibility for this publication lies with the authors and the funders are not responsible for any use that may be made of the information contained herein.