This paper looks at factors and principles that affect taxation, including government revenue, economic efficiency, fairness of tax burden, tax as deterrent, auditing to ensure efficient collection and energy conservation, to examine issues related to commodity tax in Taiwan. Data on tax revenue in Organization of Economic Cooperation and Development member states is then used to undertake international comparison of commodity-tax systems and tax structure to gain a clearer picture of international trends to serve as a reference for future development of commodity tax in Taiwan. Since the 1990s, OECD member states (particularly Scandinavian nations) have been implementing green-tax reform. This reform involves increasing taxation on petroleum products and motor vehicles, as well as imposing carbon taxes on products containing carbon and those responsible for CO2 emissions. Petroleum products constitute a tax base that is both broad and deep. By taxing these products, not only can governments boost tax revenue, but also employ the user-pays principle to correct externalities and save energy. In some cases, they can use taxes to replace income taxes, thereby reducing welfare loss from taxation. This creates a double dividend. This study also examines current state of environmental-pollution taxation in Taiwan and potential problems. Based on the theoretical model established in this study, international comparisons, analysis of the current situation and future trends, interviews and seminars with experts and statistical analysis, several conclusions have been drawn. First, Taiwan’s commodity-tax structure is heavily-oriented toward taxation of petroleum products and motor vehicles. In addition, petroleum-products’ share of total commodity tax is increasing rapidly, while share of wine and tobacco products is falling. The share held by motor vehicles has fluctuated between 20 percent and 30 percent. Comparison with OECD member nations reveals that commodity-tax structure in Taiwan and development trends are broadly similar to those in OECD member countries. Although Taiwan has yet to implement a green-tax system, the current system does impose taxation on air and water pollution, and it has been established that need to save energy and protect the environment are two important bases for imposition of commodity tax. Thus, the current system already has the basic properties of a green-tax system, although more effort is needed to perfect it. On the basis of these conclusions, the following recommendations are put forward: In the short term, commodity-tax items that do not conform to current realities should be abolished, including commodity tax on rubber tires, beverages, plate glass and electrical appliances. However, commodity tax should be retained for motor vehicles, petroleum products and cement. These changes would bring Taiwan’s commodity-tax system into line with international trends relating to environmental protection and energy conservation. In the medium term, motor-vehicle fuel and air-pollution prevention fees should be incorporated into the commodity-tax system for petroleum products. Commodity tax should also be levied on luxury entertainment and consumption goods such as golf equipment, luxury cars, large motorcycles and yachts. In the long term, the government should consider levying a carbon tax and gambling tax.
