Greening our cities, greening our tax system

March 20, 2017
Jerik Cruz, Eaglewatch
This few would question: the state of Metro Manila is now a national catastrophe. Only the annual costs of carmaggedon (P1,095, based on National Economic and Development Authority P3 billion-a-day estimates,) already surpass our yearly losses from natural disasters (P206 billion) more than five times over.
Yet, our traffic ordeals are just the most garish displays of our country’s urban nightmare. All across the Philippines, untrammeled urban expansion has propelled our cities’ built and natural environments far beyond their limits. Car pollution has spiked by at least 44 percent in the last decade; land conversions have surged in Regions 3, 4-A, 6 and 10, drowning peri-urban ecosystems in unruly sprawl; disaster risks have risen to stratospheric heights, with Metro Manila now pegged by the Cambridge Center for Risk Studies in 2015 as the fourth riskiest conurbation on earth.

Gates of hell or incubators of sustainability?
Gates of hell, urban monstrosities: often the images with which we portray our urban present cast our cities with a destructive, even dystopian tinge.
But, in truth, our cities need not be gas-guzzling abominations. When managed well, in fact, they are not only engines of economic dynamism, opportunity and innovation—they can and should be among our prime incubators of sustainable futures for ourselves and our planet.
Thanks to trailblazing work by organizations, such as the International Institute for Environment and Development, we now know just how vital cities will be over the next century for turning the pledge of sustainable development from promise to reality. No known country in history, to begin with, has lifted most of its population out of material poverty without urbanizing; and unless we forgo commitments to securing a high quality of life for all, only through compact, resource-efficient, green cities does it seem possible to guarantee universal high living standards, while minimizing our collective footprint on the global environment.
We will only realize such cities if they are built on affordable mass transit; high-density, mixed-use spaces with accessible in-city housing; and well-planned, well-governed, ecologically sound and disaster-resilient urban systems. Though we are leagues away yet from realizing these goals in the Philippines, the momentum for decisive action has finally began to snowball.
Train and the promise of green taxes
For one, plans for developing bus rapid-transit systems in Metro Manila and Cebu are already slated for completion starting in 2018. But the nationwide impact of measures against our urban woes will be even more marked if the Tax Reform for Acceleration and Inclusion (Train) bill (HB 4774), now being deliberated in Congress, is passed into law without compromises.
Spanning an array of tax adjustments, such as restructuring personal income taxes in favor of the poor and the middle class, and reducing exemptions against value-added taxes, no less prominent in the reform package have been proposals to hike fuel excise taxes by roughly P6 per liter by 2020, and at least doubling automobile excise-tax rates, except on mass transportation and freight vehicles. By discouraging excessive private-car use and its impacts on the urban environment and traffic, both reforms will actually function as de facto green measures.
Told in these terms, not only can the TRAIN bill’s fuel and car taxes rebalance lost tax revenues from slashing income-tax rates for the poor and the middle class— they can form the first of a new generation of “green taxes” in the Philippines. As taxes that address both revenue and broader environmental objectives, by encouraging and penalizing environment-friendly and harmful activity, the scope for adopting such green taxes to address some of our most vexing urban problems is both vast and enormously promising.
On one hand, at the national level, the Philippines’s National Tax Research Center has already estimated that imposing carbon taxes on carbon-polluting electricity sources could yield up to P122 billion in revenues, which can be used to finance local sustainability initiatives nationwide.
Yet, other possible green levies are worth mulling over, especially at local government levels. Property taxes, idle-land taxes and development fees, for example, could all be redesigned to curtail urban sprawl and favor high-density development. Once quality commuting alternatives are furnished, congestion pricing schemes and parking levies, like those in Singapore, could be trialed in central business districts to buttress the ongoing antitraffic crusade. Existing disaster-resilience criteria already incorporated into local government units’ internal revenue allocation procedures and the Performance Challenge Fund could also be expanded to include broader sustainability priorities, such as for density-heightening and resource efficiency-enhancing projects.
We are just beginning to imagine ways in which green taxes can be realized in the Philippines— but which specific form they take is less important than their common promise for all Filipino urban dwellers. We need not have cities that are environmental blights, national catastrophes. Bolstered, among others, by green fiscal systems, the day may yet come that they will lead our way towards inclusive urban development and ecological sustainability.
Jerik Cruz is a lecturer in the Ateneo de Manila University Department of Economics. His areas of focus include, among others, local public finance and the economics of sustainability.