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China Environmental Tax: Implications for Multiple Industries

On June 10th, the State Council released the draft of the Law of Environmental Protection Tax. The draft explained the basic concepts underlying this environmental tax and its specific implementation rules.

The tax will be imposed on enterprises and organizations that directly discharge pollutants into the environment. Those subject to this tax are clearly defined in the new Environmental Protection Law that went into effect from Jan 1st this year.

The taxable pollutants include atmospheric pollutants, water pollutants, solid wastes, construction noises, industrial noises and other pollutants. However, the tax could be exempted or reduced in following situations:

  • Discharge of the taxable pollutants to legal sewage treatment plants or domestic garbage disposal plants

  • Storage or dispose of the industrial solid wastes in the facilities and sites that conform to the environmental protection standards

  • The taxable pollutants from agricultural production (excluding large-scaled culture)

  • The taxable pollutants from the mobile sources of pollution such as motor vehicles, railway locomotives, watercrafts and aircrafts

  • The taxable pollutants discharged into the environment below the national emission standards by the sewage treatment plants and domestic garbage disposal plants

  • For enterprises and organizations who discharge the atmospheric and water pollutants below 50% of the national emission standards, the provincial government could reduce their environmental tax by half.

The amount of the tax will be in accordance with the current discharge fees. But when the actual discharge is above the emission standards, the tax will rise rapidly:

  • If either the concentration or the total amount of the pollutant is higher than the national or local emission standard, the tax will be doubled

  • If both the concentration and the total amount of the pollutant are higher than the national or local emission standard, the tax will be tripled

“This kind of multiple tax has never been used in other Chinese tax laws,” said Mr. Liu, professor of the law school of Beijing University. According to the draft, the discharging enterprises and organizations should notify the tax authority and pay the tax based on the emissions. Professor Liu believes that the official Environmental Tax Law will be published within 2 years.

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