China Expected to Revise Environmental Taxation

February 7, 2011 Taxation in China

Coal-fired Power PlantChina, the world’s largest emitter of carbon dioxide, is expected to instate strong tax based disincentives for polluters.

China’s next five-year plan, which will be released in March, is expected to include several taxation measures aimed addressing the country’s pollution problems and growing levels of environmental emissions. The new tax will replace the current set of environmental charges, which are considered to be ineffectively low, and poorly enforced by the government’s environmental departments.

The form and rates of the environmental tax have not yet been finalized, with several proposals having been submitted for consideration for the upcoming five-year plan. According to media statements, the government will aim to levy a fee on the discharge of sulfur dioxide, sewage and carbon dioxide, among a list of other environmental contaminants. It is expected that taxation of carbon dioxide gas emissions will be more stringently monitored by tax authorities, with applicable rates being higher than on other forms of emissions.

Revenues raised from the tax will be collected by the central government, and used to fund ecosystem restoration projects and potentially compensate victims of industrial contamination accidents. However, the tax’s primary goal would be to act as a strong disincentive to polluters.
It is anticipated that the tax will initially be instated in the Jiangxi province, as a regional pilot project, after which the program will be expanded to a national scale.

Alongside the tax, the government is also expected to announce an expansion to current resource tax, to discourage overuse of the country’s mineral and water supplies. A mandatory sectoral carbon trading system is also expected to be revealed shortly.

Photo by Rennett Stowe