Industries now taxed for waste emissions under China’s new environment law

China’s first environment protection tax law kicked in on January 1 this year, replacing a pollutant discharge fee system which, for decades, had been in place but lacked teeth.

Under the new law, companies will have to pay levies for waste discharged into the environment—such as sulphur dioxide and sewage. They will also be taxed for noise pollution.

The tax rates range from 1.2 – 12 yuan per unit of atmospheric pollution; 1.4 – 14 yuan per unit of water pollution; five yuan per tonne of coal waste; and 1,000 yuan per tonne of hazardous waste. They are determined based on each company’s operations. For example, a furniture manufacturer that earns 50 million yuan per year may report an overall tax rate of 300,000 – 700,000 yuan, or up to a two per cent increase on the factory price of its products, according to industry analysts.

The new law is intended to discourage heavy-polluting industries, many of which have flocked to the country to take advantage of its low cost and weak environmental regulations.

China has imposed a “pollutant discharge fee” since 1979. However, loopholes in the system have seen companies evading taxes, especially the bigger ones that contribute to the local economy. Now any tax reduction or exemption request must undergo strict approval procedures and be documented.

Tackling pollution was listed as one of “three tough battles” China aims to win in the next three years, according to the Central Economic Work Conference that concluded in December.

“The launch of the environmental tax is more serious than the pollutant discharge fee system and marks China’s first real effort to use financial mechanisms to curb pollution,” Liang Yinlei, partner of Tax Department at Ernst & Young Greater China, said in an interview with Jiefang Daily. “Some manufacturers may buy more environmental-friendly equipment to reduce its sewage waste in order to pay less tax.”

Between January and November last year, China investigated over 35,600 cases of environmental violation, a 102 per cent year-on-year increase from 2016.

Source: Canada Wood