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Three major controversies remain regarding the environmental protection tax legislation
Release time:
02 Jul,2015
The Environmental Protection Tax legislation will fill a gap in China's tax system; the Environmental Protection Tax may become the first new tax levied in China after the 18th Central Committee's Third Plenary Session. Therefore, the draft has attracted much attention from academia, the practical community, and the business community. In the 20 days before the opinions were solicited, various sectors raised several opinions on the draft.
The deadline for public comments on the "Draft Law of the People's Republic of China on Environmental Protection Tax" (hereinafter referred to as the "Draft Law") is in 9 days.
The enactment of the Environmental Protection Tax will fill a gap in China's tax system; it may become the first new tax levied in China after the 18th National Congress of the Communist Party of China's Third Plenary Session. Therefore, the release of the draft law has attracted much attention from academia, the professional community, and the business community. What opinions have been raised by various sectors during the previous 20-day comment period?
It has been learned that on June 25, the Chinese Society of Law held an "Expert Seminar on the Draft Environmental Protection Tax Law and the 18th Legislative Expert Consultation Meeting of the Chinese Society of Law in 2015" in Beijing. More than 20 experts attending the meeting discussed the draft law and put forward relevant opinions. Among them, the 10 questions raised by Professor Xiong Wei, director of the Tax Law Research Center of Wuhan University and vice president of the China Society for Fiscal and Taxation Law Studies, are quite representative. On the 28th, Xiong Wei accepted an exclusive interview with a reporter from Yangcheng Evening News and introduced his views and the controversial issues surrounding the draft law.
Controversy 1
Should it be called the Sewage Discharge Tax or the Environmental Protection Tax?
Judging from the name of the draft law, the name of the new tax after the reform of the sewage discharge fee is the Environmental Protection Tax. However, the Yangcheng Evening News reporter learned that there are different opinions and controversies among experts from academia and the professional community regarding this name.
Some experts suggest that the scope of the Environmental Protection Tax should be broader, and the current content is limited to sewage discharge, which is inconsistent with its name. It should be called the Sewage Discharge Tax, which can coordinate the relationship with the pollution product tax and leave room for future taxes on other specific polluting behaviors or products.
Professor Xiong Wei frankly stated that he supports this opinion. Xiong Wei explained to the Yangcheng Evening News reporter that more than 90% of the content of the draft law is transferred from the current "Regulations on the Administration of the Collection and Use of Sewage Discharge Fees," and it does not involve all environmental protection matters. Environmental protection includes at least three aspects: sewage discharge; resources and ecological environment; and products that may cause pollution.
“Only by including these three aspects can it be considered a more appropriate environmental protection tax. However, currently, only sewage discharge is included in the draft law, and it is a sewage discharge tax, but it has a very big hat,” Xiong Wei said.
Xiong Wei pointed out that if it is called the Environmental Protection Tax, it will be difficult to levy independent taxes related to environmental protection in the future. Therefore, we might as well consider calling this tax the Sewage Discharge Tax, and when conditions are ripe in the future, other taxes can be formulated to gradually build the framework and system of the environmental protection tax. Alternatively, another solution is to add the content of the other two parts of environmental protection to the draft law. However, since China has already levied a separate resource tax, and some polluting products (such as refined oil, batteries, and paints) have been included in the tax items of the consumption tax, it is very difficult to coordinate the relationship between the three taxes in the short term. Therefore, it is more realistic to rename it the Sewage Discharge Tax.
Controversy 2
Should carbon dioxide emissions be included in the tax scope?
As early as 2011, He Jiankun, an expert from China's climate negotiation delegation, revealed that from 2000 to 2010, China's carbon dioxide emissions accounted for 12.9% to about 23%, and the per capita carbon dioxide emissions have exceeded the world average. The "Joint Statement on Climate Change between China and the United States" issued on November 12, 2014, stated that China plans to peak its carbon dioxide emissions around 2030 and will strive to achieve the peak earlier. He Jiankun once explained: "Professionally speaking, the rate of decline in carbon emissions per unit of GDP must be higher than the rate of GDP growth in order to reach the peak." In other words, China is currently under great pressure to reduce emissions.
Against this background, should the Environmental Protection Tax Law include carbon dioxide as a pollutant, or stipulate that emissions exceeding a certain standard should be taxed? This is another issue with considerable controversy in academia and the professional community.
Some experts believe that carbon dioxide emissions should be subject to environmental protection tax, but other experts believe that once levied, it will have a significant impact on economic development.
“If we really want to strengthen environmental protection, we should include this, because our carbon dioxide emissions are indeed too large. It is heard that if a carbon tax is levied, even at the lowest standard, the country can collect 90 billion yuan a year, while the current annual sewage discharge fees are less than 200 billion yuan. Since we are transforming the original sewage discharge fees into an environmental protection tax to strengthen environmental protection, why are we excluding carbon dioxide tax, which is most likely to force enterprises to conserve energy and reduce emissions?” Xiong Wei questioned that if there is no difference in the position, intensity, and pace compared to the original collection of sewage discharge fees, the time and effort spent on levying the environmental protection tax will not be significant, and the current sewage discharge fee system can still play its role.
Controversy 3
Should taxes still be levied if sewage treatment standards are met?
Both the current "Regulations on the Administration of the Collection and Use of Sewage Discharge Fees" and the draft Environmental Protection Tax Law stipulate that enterprises, institutions, and other producers and operators whose pollutant emissions meet the standards must pay sewage discharge fees or environmental protection taxes; those exceeding the standard will be charged or taxed double.
In this regard, some environmental protection professionals suggest that the environmental protection tax legislation should not continue the current collection approach of sewage discharge fees, but should be linked to normal and standard sewage discharge. It is suggested that the pollutant emission standards should be set more strictly, and no tax should be levied on normal and legal sewage discharge that meets the standards, and only those exceeding the standards should be charged or taxed.
Xiong Wei told reporters that some enterprises feel wronged because they have invested funds in treatment and have met the standards, but they still have to pay fees or taxes.
“Both sewage discharge fees and environmental protection taxes are based on a common concept, based on the damage caused to the environment by taxpayers and producers and operators. Since the emissions meet the standards, it means that the damage to the environment is not significant. Sewage discharge is unavoidable; enterprises cannot avoid sewage discharge as long as they produce, and this is also a right. The setting of emission standards, on the one hand, gives everyone the right to discharge sewage, and on the other hand, if emissions exceed the standard and cause environmental damage, they must bear the consequences. Why don't we set the emission standards more strictly to force enterprises to increase the treatment of pollutant emissions? Pre-pollution treatment is much more effective than post-pollution treatment,” Xiong Wei said.
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