The Life and Death of the Dutch Groundwater Tax
Water Policy 15(6):1064-1077
15 Pages Posted: 23 Apr 2012 Last revised: 28 Nov 2013
Date Written: August 1, 2013
We examine the Dutch national groundwater tax (GWT) – a ‘win–win, green’ tax that promised to reduce distortions by simultaneously reducing the income tax burden and improving environmental outcomes. We find no evidence of these impacts. Instead, we see that the GWT increased distortions by taxing a narrow base (a few drinking-water companies reliant on raw groundwater) and interfering with groundwater management programmes funded by an existing provincial groundwater fee. The Dutch government revoked the GWT for being fiscally inefficient and environmentally unhelpful on 31 December 2011, but this story provides some useful lessons.
Keywords: Green tax, groundwater, Pigouvian tax, fiscal policy, regulation
JEL Classification: H23, Q28, Q56
Suggested Citation: Suggested Citation