On Aug 28th, China’s Standing Committee of the National People's Congress deliberated on the draft of “Law of Environmental Protection Tax”, which was jointly drawn up by the Ministry of Finance (MOF), the State Administration of Taxation (SAT) and the Ministry of Environmental Protection (MEP). Once finally established, the environmental protection tax will be the 19th tax in China.
Currently the main governmental charge on pollution in China is the pollutants emission fee, which was developed and implemented in the form of the first Law of Environmental Protection in 1979. The State Council issued the Regulation of the Management of Pollutants Emission Fee and specified the requirements on the levy and use of the emission fee in 2003. During 2003 to 2015, the total amount of pollutants emission fee all over the country reached 211.6 billion RMB. The emission fee system played an important role in containing the pollution and protecting the environment. The VOC emission fee in many provinces which has drawn a lot of attention recently is also another type of emission fee.
However, the emission fee system is far from perfect and has been criticized by the public. The emission fee is implemented and levied by local environmental protection authorities, who sometimes lack enough law enforcement power. The implementation of levies can be disrupted by other departments of local government to protect economic development. As a result, many enterprises that exceed emission limits have gotten away withnot paying the penalties they should. For example, this April, a chemical plant in Gaoyou, Jiangsu Province was found discharging waste water that exceeded pollutant concentration limits. In the end, however, the plant was only fined 603 RMB. The event was discovered by public and was a PR disaster for both the enterprise and local government. What’s worse, some local governments attract enterprises and investment by exempting their emission fees entirely.
As a consequence of the malfunctioning emission fee system, Chinese government has been considering establishing the environmental protection tax to replace the emission fee because taxation is compulsory and taxation authorities usually have more enforcement power than local environmental protection authorities.
The draft of the environmental protection tax law doesn’t make many changes to the emission fee system. The taxable scope includes atmospheric pollutants, water pollutants, solid wastes and noise. The tax standard is also similar to the emission fee: 1.2 RMB per pollutant equivalent for atmospheric pollutants, 1.4 RMB for water pollutants and for solid wastes the tax is 5~30 RMB per ton. The tax would be halved if the discharged pollutants are lower than 50% of the limits. The minister of MEP, Jining Chen thinks the taxation standard reflects the purpose of the tax which is not to increase the tax revenue of the government, but to provide a more solid legal basis to curb pollution. However, the minister of MOF, Jiwei Lou also outlined that local governments are authorized to raise the tax standard if they have had a higher emission fee standard previously, such as Beijing and Shanghai, who had more stringent charge standards for VOCs emission.
Five types of pollutants emission are exempted from the tax:
Pollutants emitted by motor vehicles, ships and aircrafts.
Pollutants emitted by agricultural production.
Pollutants emitted by technically qualified sewage treatment plants and garbage disposal plants.
Solid wastes that are utilized by taxpayers using technically qualified methods.
Other situations approved by State Council.
The exemptions show that the environmental protection tax is mainly imposed on certain industries. Industries in which emission amount can be easily calculated will be impacted most, including the chemical industry and papermaking industry.
