Scottish Aggregates Levy: evidence review and policy options

Appendix 4: Review of Similar Taxes in Other Countries

Danish Raw Materials Extraction Tax

The Danish raw materials extraction tax was first introduced in 1977 at the rate of DKK 0.35/m³ (£0.04/m³). It was increased to DKK 0.5/m³ (£0.06/m³) in 1983. In 1990, a new tax was introduced on raw materials at the rate of DKK 5/m³ (£0.58/m³) for selected extracted raw materials.^[78]

Like the UK Aggregates Levy, the Danish raw materials extraction tax is levied on raw materials that are commercially extracted and consumed in Denmark or imported, whilst it excludes raw materials that are exported. The tax is applied to sand, gravel, stones, peat, clay and limestone, among other minerals.

The raw materials tax was introduced in close junction with the waste tax, which was introduced in 1987 at the rate of DKK 40/tonne (£4.60/tonne) of waste landfilled or incinerated. In 1993 the tax was differentiated for landfill and incineration. For landfill it increased substantially to DKK 335 (£38.56/tonne) in 1993, and subsequently increased to DKK 375 (£43.16/tonne) in 1998. The main intention of the two taxes in combination is to reduce the use of the above resources and encourage substitution to recycled materials. The two taxes have resulted in a marked increase in recycling of C&D waste, although the majority of impacts could be attributed to the landfill tax, given the large difference in the tax rates.^[79]

Swedish Tax on Natural Gravel

The natural gravel tax in Sweden was introduced in 1996 with an aim to substitute some of the gravel demand by its closest substitute, crushed rock. Thus the tax rate was set at a level high enough to close the price gap between gravel and crushed rock. The tax level was initially set at SEK 5 (£0.41) per tonne to match the price difference before introduction of the tax (SEK 7-8 per tonne).^[80] The Swedish Environment Protection Agency estimated that the majority of the tax burden was borne by the consumers (around SEK 4.5) due to the relatively low own price elasticity of demand. This also implies that the tax is likely to have had limited economic effects on production, while it should have provided an incentive to substitute form natural gravel to crushed rock.

In 2003, the tax was raised to SEK 10 (£0.83) per tonne, mainly to increase the incentive to substitute, and in 2006 it was increased further to SEK 13 (£1.07) per tonne. Also the natural gravel tax in Swedish is levied on extraction consumed in Sweden, on extraction for export but not on imports. In this way the tax is not designed to address competitive issues. In theory this means that imports become relatively cheaper and can thus outperform Swedish production. However, this is unlikely in practice given the high transportation costs associated with import.

The tax has been very successful in substituting natural gravel with crushed rock. However, the tax might not have been very efficient, as the uniform tax rate across Sweden did not address regional differences in availability of natural gravel in different parts of Sweden. For example, given that the availability of natural gravel is much higher in Northern Sweden, the tax in Northern Sweden could be set at lower rate compared to the rest of Sweden to ensure a more efficient regional distribution of natural gravel extraction.^[81]

Mineral Resource Extraction Charges in Estonia

Mineral resource extraction charges were introduced in Estonia in 1991, which are imposed on various state owned minerals such as construction rocks, energy minerals and minerals used in agriculture. Rates of the charge were based on the quantity of resources extracted. Extraction of construction minerals like gravel and sand located on private land is not taxed; the price is negotiated between the extracting company and the landowner. However, extracting companies are required to obtain permits for the extraction of state owned or privately owned mineral resources.

Mineral resource extraction charges have increased several times over the years. Subsequently, this has led to an increase in environmental tax revenues. However, these charges could not successfully reduce quantity of mineral resources extracted, nor could these increase resource productivity, which could be due to a lack of complementary policies, such as landfill tax covering disposal of relevant minerals.^[82]