28 June 2016
Environment Protection Tax Law Expected Before End of 2016
The legislative process for introducing a tax on environmental protection is progressing at a rapid pace in China.
In early June, the Environmental Protection Tax Law research group of the State Council conducted studies on the environmental protection tax law in Nanjing to pave the way for the first review of the law later this month. If everything goes well, the Environmental Protection Tax Law may be promulgated before the end of the year.
Under the Environmental Protection Tax Law (Draft for Comments), environmental protection tax is levied on air pollutants, water pollutants, solid wastes and noise. The specific taxes shall be levied in accordance with the provisions prescribed in the tax items and rates table. Enterprises in 14 key industries, including thermal power generation, iron and steel, cement, electrolytic aluminum, coal, chemicals and textiles, are subject to monitoring and control. The State Council and the people's governments of various provinces, autonomous regions and municipalities may increase (adjust) the types of heavy pollution industries based on environmental protection needs.
According to the Draft for Comments, the levying standards are basically the same as the existing standards for the collection of pollutants discharge fees. The provincial people's governments can appropriately raise the applicable tax amount of the taxable pollutants based on the prescribed tax amount by giving overall consideration to the local environmental load capacity as well as their existing pollution emissions and targets for economic, social and ecological development, and report the adjustment to the State Council for the record. Tax will be doubled for the discharge of effluent in excess of the prescribed standards and total volume.
This means that the levy may be doubled or discounted. Where the concentration of the discharge of taxable air or water pollutants by a taxpayer is less than 50% of the standard set by the state or local government and not beyond the total emissions control index, the people's government of the province, autonomous region or municipality concerned may decide to reduce the environmental protection tax payable by half within a given period of time.
In order to encourage the development of energy-saving technology designs, such as environmental protection, energy-saving and water-saving designs, some industry players suggested including income derived from technical services, including technology transfers, training and counselling, provided by enterprises in these regards in the concessions for technology transfers in enterprise income tax.
The imminent introduction of environmental protection tax is set to increase the costs and burdens of enterprises, especially those with high energy consumption and heavy pollution, and compelled them to take measures to internalise these external costs. This will make them realise that pollutants discharge come at a cost. The heavier the pollution, the higher the cost. This idea of "the polluter pays" will compel enterprises to improve their technology, strengthen management, lower energy consumption, and reduce pollution.