How to tell green from grey? Towards a methodological framework for evaluating the greening of national tax systems

In this paper, we evaluate four types of indicators that can be used for measuring the greening of a tax system: revenue-based indicators, single tax rates, aggregate tax-rate based indicators and the implicit tax rate on energy. We develop an evaluation framework, introducing two principal evaluation criteria: content validity and comprehensiveness, and four statistical criteria: data availability, comparison over time, international comparability and ease of aggregation. Additional analysis regarding the issue of weighting is carried out for the aggregate tax-rate based indicator. The theoretical and methodological evaluation is supplemented and validated empirically using recent data on the Belgian and Flemish tax system. Finally, conclusions are drawn with regard to the strengths and the weaknesses of the four types of indicators, and recommendations are made for further research.