Allocation of environmental taxes in the context of general government expenditures on environmental protection in the European Union Member States

Since many years in the European Union more attention has been paid to environmental taxes (also fees and other charges) as an important source of public revenues. It is argued that the increase in environmental taxes should raise the quality of the environment while at the same time ensuring budgetary implications. Despite the existence of non-assignment rule in the public finance there is no doubt that in the case of environmental taxes, fiscal targets are related to non-fiscal objectives. Consequently, the state demand for this source of revenues should stem from the necessity for environmental protection. The objective of the paper is to examine to what extent revenues from environmental taxes are allocated to finance environmental protection in the EU countries. The research is based on the Eurostat data on environmental tax revenues and environmental protection expenditures of the general government sector and covers the period 2006 to 2015. In most EU countries less than a half of environmental tax revenues has been spent on environmental protection. The average ratio of environmental protection expenditures to environmental tax revenues in the particular EU countries varies from 10.1% to 55.4%. In order to test the linear relationship between environmental taxes and expenditures it has been conducted the Pearson correlation analysis. A statistically significant, strong and positive relationship between these variables has been observed. The result could be interpreted in two ways: - more environmentally related taxes imply greater spending on environmental issues or - the growing need to comply with the EU obligations concerning environmental protection entails an increase in environmentally related tax burden.