ABSTRACT
The Covid 19 pandemic profoundly affected society's social and economic life. At the same time, it accelerated another long-delayed process. This is the need to modernise taxation. The European tax legislation in income taxation has stayed the same for a long time. To some extent, it is outdated. It does not correspond to the modern societal changes and the realisation of new types of income not covered by the law. Many European countries rely heavily on their income taxes on the budget's revenue side. The forecasts point to fewer and fewer opportunities to generate income due to the ageing working-age population. All these arguments determine the need for modernisation and gradual replacement of income taxes. The present study defends the thesis that a promising opportunity to compensate for the reduced revenues from income taxation is related to strengthening the environmental function of taxes. The possibility of limiting environmentally harmful substances such as pesticides through taxes has been analysed. This change the authors propose to achieve this in two ways. The first one requires eliminating dif-ferentiated reduced VAT rates for pesticides, plant protection materials and fertilisers unless the latter are organic. The second one proposes the possibility of introducing a tax on pesticides. Such a tax could limit their use as well as generate new revenue. In this regard, the experience of the few countries applying a pesticide tax is analysed. The various options for determining the tax base as a critical point in defining the tax are argued. © 2023, Agricultural Academy, Bulgaria. All rights reserved.