25 May 2019

Environmental tax may not be too far away

A draft proposal on environmental tax has been submitted to the State Council for approval, the China Securities Journal reported last week, citing a source close to the finance ministry.

The news doesn’t come as a surprise as it was widely known that experts and officials from the Ministry of Environmental Protection, the State Administration of Taxation and some other government departments have been mulling the new tax for more than five years.

The initiative is in line with an action plan mapped out by the central government this May to tackle the nation’s worsening pollution, with concerns mounting after dense smog blanketed many regions this year — with Shanghai being the latest — and sparked an outcry among the public and environmental watchdogs.

Observers believe the upcoming tax measure will involve a levy on firms that emit air and water pollutants, with the penalties significantly higher than the current exhaust gas and sewage charges.

The new regime will also cover other aspects including solid waste, noise, emissions of carbon dioxide, sulfur dioxide and ammonia nitrogen compounds. With the expected rules, several high-pollution industries like paper, textiles, steel, electricity, non-ferrous metals and mining will see their operating costs rise while some smaller producers with idle capacity will be phased out. Previously they were charged only if they exceeded the emission limits set by the authorities.

The Securities Journal source declined to give a specific rate for the tax, saying various polluters will be taxed in a flexible way based on their “pollutant emission status” — the types of pollutants and their impact on the environment.

New Express Daily reported earlier that China would charge polluters 5-10 yuan (US$0.82-1.64) per metric ton of carbon dioxide they emit. The Securities Journal, meanwhile, had estimated that annual revenue from the tax could top 100 billion yuan.

As some provinces and municipalities are mired in debt, it is believed that the bulk of the revenue from the tax, reportedly up to 80 percent, will be left in the hands of local governments to boost their finances and provide an incentive to carry out environmental conservation programs and clean up the air, water and soil.

On top of the tax, China has also indicated that it will adopt more market-oriented initiatives such as carbon trading, emissions trading and eco-labels to press ahead with an industrial overhaul and encourage firms to go green.

– Contact the writer at [email protected]


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