In 1996, a new law was enacted in Barbados requiring a tax to be paid on all imported goods into Barbados. This tax is called the Environmental Levy and its stated use is to defray the expenses associated with managing the solid waste component of imported items. If the imported item was subsequently exported from Barbados, then the tax was to be refunded to the importer.
The Act contains a schedule listing the tax rates to be applied to the goods. Some of the tax rates listed are $150 for each motor vehicle, $15 for each refrigerator, stove, or washing machine, and $10 for each television. The schedule states that a 1% tax rate is to be applied to the cost of goods imported in specified packaging, and a 0.75% rate is to be applied to the cost of all other goods.
Nearly all of the solid waste stored in Barbados’ landfills is from imported items. For a country of Barbados’ limited land space, the Environmental Levy Act is a highly responsible initiative. During the international trade negotiations, there has been a call for this tax to be applied to locally manufactured goods, and for transparency in justifying the rates charged. The Levy has been in operation for the past seven years, and today we shall place it in the balance. The aim is to improve the enforcement and fairness of the Act.
From my experience, the Act appears to be effectively and efficiently administered by the Customs personnel at the ports of entry. The Act is also easily available to any person from the Government’s Printing Department for $2.88.
To examine the fairness of the Act, the tax rates should be justifiable. One method of calculating the rates could be to determine the costs associated with storing the solid waste component of the imported item until the material had degraded. Degradation periods are known for various materials under various environmental conditions. However, where the degradation period exceeds 25 years, then it could be assumed that future technological advancements would result in a more effective method of solid waste management, than land filling all of the wastes.
Using this principle, the Environmental Levy rates can be estimated for some popular imported items. Some assumptions must be made, which can be confirmed with more accurate data. However, the assumptions are not unreasonable. The lease value of land over 25 years can be assumed to be equal to the current market value, which is approximately $15 per square foot. The land tax rates can be assumed to remain constant resulting in an average annual land tax of approximately 5 cents per sq ft of land area.
The tax to apply to an item with a degradation period exceeding 25 years would then be $16.25 per sq-ft of the imported item. Therefore a car would attract a revised tax of approximately $1,000 instead of $150. A refrigerator would attract a revised tax of approximately $150 instead of $15, a TV would attract a revised tax of approximately $50 instead of $10, and living room furniture would attract a revised tax of approximately $350 instead of $15.
Another method would be to calculate the solid waste management cost based on the volume of the waste, and assume a disposal height limit of 20 feet. Including the transportation, compaction, and other operating and maintenance costs associated with the disposal site results in similar revised tax amounts.
For goods that degrade faster, like fruit and vegetables in cardboard containers, the food would normally be ingested. Assuming a 2-year degradation period for cardboard, results in a revised tax of approximately $5 per box instead of the current 50 cents. A similarly sized box of tinned foods would result in a tax of approximately $25 instead of the current $1.00.
Imported materials are generally used in the local manufacturing industry. The Environmental Levy is already applied to these items, therefore the call for local manufacturers to pay the Environmental Levy is unfair.
Taxpayers, and by extension local manufacturers, are currently subsidising most of the disposal costs associated with imported items. This is not equitable. The Environmental Levy could therefore be revised to present a more realistic retail cost of imported items. It would also provide an incentive for persons wishing to export wastes to recycling markets, thus reducing the strain on Barbados’ solid waste disposal sites.