An article written by three staff members of UP's Department of Economics was featured as the Editor's Pick on the Global Water Forum (GWF), an online resource publishing concise, open-access articles from leading researchers on water governance, policy and science.
The article, titled '
Water taxation and the double dividend hypothesis', was co-authored by Dr Nicholas Kilimani, Prof Jan van Heerden and Dr Heinrich Bohlmann, and investigates the possibility of designing a tax policy that is capable of minimising the costs of environmental regulation, while achieving economic objectives such as raising tax revenue. A specially developed water computable general equilibrium (CGE) model was used to investigate the economic impact of a water tax on the economy.
A policy of Uganda's Ministry of Finance, Planning and Economic Development to levy a value-added tax (VAT) on commercially distributed water motivated the research. Investigating this policy, the authors contended that a well-designed tax could induce efficient water use and also harness resources for financing the development and expansion of an efficient water supply infrastructure.
The research employed different taxation and revenue plough-back scenarios in order to answer questions which are at the core of the double dividend hypothesis, regarding the impact of the policy on the key macroeconomic variables, the environmental impacts of a water tax, and the effect on employment.
Findings of this study can be extended to other developing economies whose use of environmental tax instruments is still limited, and stand to suffer from the adverse effects that may arise from the mismanagement of environmental resources.
The Global Water Forum was established in 2010 as an initiative of the United Nations Educational, Scientific and Cultural Organization (UNESCO) at the Australian National University.
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