Environmentally friendly tax measures in the Portuguese jurisdiction. Enforcement of the polluter pays tax principle

Abstract

Purpose This paper aims to understand what green tax measures Portuguese corporate tax law foresees and whether the measures observe the polluter pays tax principle. Design/methodology/approach The legal research method is applied to achieve the goals. Specifically, the research analyzes the most relevant corporate tax legislation to identify legal provisions influencing taxpayers’ behavior in sustainability decisions, particularly corporate income tax (CIT) and value-added tax (VAT) laws. Findings The results show that the Portuguese Green Taxation Law introduces several environmentally friendly taxation measures by benefiting or increasing the tax burden. The influence on the CIT law results from instruments such as the autonomous taxation of expenses, depreciation, provisions and the local corporate tax. In the VAT, electric tourism vehicles’ VAT deduction is possible. These measures enforce the polluter pays tax principle, increasing the tax burden on less environmentally friendly options and decreasing the tax burden on more green economic choices. These measures directly influence the companies’ choice because of the increase or decrease tax burden according to more or less polluting choices. Research limitations/implications This study only studies the Portugal case. Originality/value This study highlights the Portuguese experience reconciling taxation and environmental dimensions.