Environmental taxation as a basis for the economic and social development of the most disadvantaged sectors.


Water as a resource and global issue.

The human being has a right to life, and this is reflected in the International Convention on Human Rights (1948). Life as a fundamental value. However, the right to water as a human right was recognized sixty-two years later in Resolution 64/292 approved by the UN General Assembly in 2010. Ensuring the fundamental right, to life, but not safeguarding the right to water as such, became an illogical, absurd or at least incomplete reasoning, since without access to water there is no life.

Circumscribing the problem of the environment and the use of natural resources by human beings, only the resource of fresh water – which a priori would be suitable for human consumption-, it should be taken into account that only a small percentage of the total world water is immediately suitable for human life. This is so, since 97% of the water on the planet is salty and unfit for human consumption. Of the remaining 3% corresponding to fresh water, 79% is frozen in glaciers and poles, 20% underground in aquifers, some more than two thousand meters deep. Therefore, only 1% is “easily accessible” for human consumption for a dignified life. The word “easy” is in quotes because that 1% of drinking water is not distributed equally among the world’s population, neither within the countries themselves.

Human consumption is not the only destination given to this resource. Water as such can have different uses or destinations. For example, the Spanish Hydrological Plan (Royal Decree Law 1/2001 art. 60) establishes an order of priority of the different uses to which it may be put, with the result that:

  • Population supply, low-consumption industries.

  • Irrigation and cultivation.

  • Industrial uses.

  • Agriculture.

  • Recreational uses.

  • Navigation and water transport.

  • Other uses.

On the other hand, the Human Development Report (UN) 2006 “Beyond scarcity: Power, poverty, and the global water crisis” presents eight reasons why country governments should act to address the issue of access to water and sanitation. These reasons are directly linked to the Millennium Development Goals (UN)

In the call for action by governments, the following reasons stand out among many others:

  • The absence of clean water and adequate sanitation is a major cause of poverty and malnutrition.

  • Water-related diseases, such as diarrhea, in addition to causing death in many cases, diminish children’s ability to learn.

  • The slow progress related to water and sanitation is causing disruption in other areas of the economy, and society.

Likewise, the report of the Food and Agriculture Organization of the United Nations (FAO), 2013, entitled “Coping with Water Scarcity: A Framework for Action on Agriculture and Food Security” is limited to food security issues in the context of global water scarcity, where, in addition to addressing conceptual and definitional issues of water scarcity, it addresses the development of policies, options and criteria to be taken into account in decision-making.

Those public policies that could be adopted in the different countries, according to the report, could be grouped into those related to supply management, or demand management. As with any other type of good, the report states the need for “increased supply” and “demand management”.

In view of the general problem from a global perspective, each country has laws that protect this strategic resource in its regulatory plexus. In Argentina there are regulations, at all levels and jurisdictions, related to the preservation and use of water. Such rules require preferential treatment, and the obligation of rational, prudent and efficient use by society.

Considered then as a human right (which could make it impossible to use it only in for-profit trade it in its natural state) but being at the same time an element with characteristics of an economic good, under the reasoning that the economy is in charge of satisfying needs through scarce goods, the State could be considered this time and in this case as a balancing actor. Through its tax policy and tax system more specifically, it can reallocate resources, based on social and environmental issues, or on principles of preservation, rational use and prudence, directly to satisfy a human right of the population, correcting existing demographic asymmetries.

It goes on to say that any introduction of a tax will affect the market, ergo society, since the actors of the economy, as taxpayers, absorb and suffer the effects of the changes introduced by the State. Regardless of the tax system in force or governing an economy, it cannot be denied that the mere existence of taxes causes effects or distortions in the economy. Among the microeconomic effects of these taxes, (which are income for the State) we find those that are linked to changes in the collective behaviors.

In addition, depending on how this income is obtained, different effects or consequences will be achieved simultaneously. One of these tax consequences is the so-called extra-fiscal purposes.

Under this consideration, the State has at its disposal a tool that can be useful to help preserve and maintain a healthy and balanced environment, as well as to guarantee access to drinking water for society in general, always bearing in mind that the basic problems described above are holding back the potential economic progress of certain regions.


The creation of a tax that discourages the waste of fresh water.

A tax on the recreational use of fresh water (excess use that is outside the scope of the human right to life) should analyze many questions, for example: the degree of inclination towards the classic principles of taxation of equity, or contributive capacity, or towards the principles of efficiency and practicality. As for the determination of the tax, although in its design one the variants can be very diversified, it would be advisable to be of the federal order, under local or municipal administration. It should not be self-declared but have the support of the water distribution companies and entities for its effective liquidation, and collection and payment, taking advantage of meters, or applying objective presumptions where there are no water meters.

Such a tax would have the capacity to push for a fair, rational and efficient use of water.

Analyzed as an environmental tax, it would produce a double dividend that should be positively assessed, and which is given by the following analysis:

On the one hand, we consider that, if the tax is well designed, and fulfils its extra-fiscal purpose, for example, to preserve the environment and satisfy the asymmetric resolution of water distribution, then we have a first dividend.

Secondly, perhaps something more complex to achieve, it turns out that if there were a correct trade-off with the orthodox tax figures, which produce distortions in the economy, the fiscal budget could be found unaltered in terms of amount, but eliminating the distorting factor of the previous orthodox figure.

This is summarized in the fact that this second dividend, “…is based on the use of the environmental tax collection to finance reductions in other distorting taxes so that the public budget remains unchanged…” (Environmental taxes and sustainable development. Edgardo H. Ferré Olive. Edition 2013).

It is not a question of introducing more taxes, but perhaps of discouraging a pernicious fact regarding the use of water, with the consideration that the resulting income can be turned over to the economic development of those disadvantaged areas that served as initial justification to establish it. In other words, the proceeds from the surplus or recreational use of water in certain sectors could be used for infrastructure development in others. We must not forget that the problem of lack of water and sanitation does not allow societies to develop as they should, so it would be logical, from the point of view of economic development, to begin by resolving this basic aspect, so that societies, or less developed countries, begin their economic take-off, with the subsequent consideration of the mutual benefits that trade provides.


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