Helena Joyce
In China, the pollution discharge penalty fee system was a market-oriented environmental measure to control water pollution and encourage enterprises to reduce industrial sewage emissions. The system was established in 1979 and replaced by an environmental protection tax in 2018. The new law addresses the issues of ineffective enforcement in levying pollution discharge fees and increases enterprises' responsibility in pollution reduction. The environmental protection tax law imposes a tax on entities that discharge taxable pollutants, including air pollutants, water pollutants, solid waste, and noise, into the environment. The law provides incentives for taxpayers to reduce their pollution levels, with a 50% reduction in fees if they lower their air or water pollution by half of the national and provincial standards.
| Characteristics | Values |
|---|---|
| Year of implementation | 1979 |
| Replaced by | Environmental Protection Tax |
| Year of replacement | 2018 |
| Previous legal basis | Regulation on Pollution Discharge Fee Collection, Usage, and Management |
| Previous enforcer | Environmental Protection Authority |
| New enforcer | Environmental Protection Authority and Tax Authority |
| Taxpayers | Enterprises, public institutions, and other production operators |
| Taxable pollutants | Atmospheric pollutants, water pollutants, solid waste, and noise |
| Non-taxable pollutant | Carbon dioxide (CO2) |
| Tax reduction for less than 30% of nationally or locally stipulated standards | 75% reduction |
| Tax reduction for less than 50% of nationally or locally stipulated standards | 50% reduction |
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What You'll Learn
- The pollution discharge fee system was established in 1979
- The fee system was replaced by an environmental protection tax in 2018
- The tax aims to increase enterprises' responsibility in pollution reduction
- The tax is levied on entities discharging taxable pollutants into the environment
- The tax excludes carbon dioxide (CO2) from its list of taxable pollutants
The pollution discharge fee system was established in 1979
The current pollution discharge fee system provides only one category of reduction in the fee – taxpayers can receive 50% off the fee if they lower their air or water pollution by half of the national and provincial standards. The fee system underwent significant changes in 2003, with the promulgation of the Regulations on the Administration of Collection and Use of Pollutant Discharge Fees. The pollution fees changed from charging by the concentration to charging by the total amount, with a unified collection standard across the country.
The legal basis for collecting pollution discharge fees is the Regulation on Pollution Discharge Fee Collection, Usage, and Management, issued in 2003, and relevant provincial regulations. Enforcement of fee payment is also mainly based on these regulations. The old discharge fee system was managed primarily by the environmental protection authority. However, the new Environmental Protection Tax Law, which came into effect on January 1, 2018, replaced the pollutant discharge fee with a newly designed environmental protection tax.
Under the new law, entities directly discharging pollutants into the environment, including air pollutants, water pollutants, solid waste, and noise, are subject to the tax. The new law also requires coordination in fee collection between the environmental protection authority and the tax authority. The obligation to pay taxes begins on the day the taxpayer discharges taxable pollutants, and taxpayers should declare and pay environmental protection taxes to the taxation authorities for the areas where the taxable pollutants have been discharged.
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The fee system was replaced by an environmental protection tax in 2018
On December 25, 2016, China's National People's Congress (NPC) Standing Committee passed the Environmental Protection Tax Law. The law, which came into effect on January 1, 2018, replaced the existing pollution discharge fee system with a new environmental protection tax.
The pollution discharge fee system was previously the legal basis for collecting pollution discharge fees in China. The fees were collected from businesses that discharged pollutants into the environment, with the aim of encouraging enterprises to reduce their industrial emissions. The fee system provided some incentives for taxpayers to reduce their pollution output. For example, taxpayers could receive a 50% discount on the fee if they lowered their air or water pollution by half of the national and provincial standards.
However, the fee system had some issues with ineffective enforcement, and the new Environmental Protection Tax Law aims to increase enterprises' responsibility in pollution reduction. The new law requires coordination between the environmental protection authority and the tax authority in collecting the environmental protection tax. It also specifies that entities who directly discharge taxable pollutants into the environment are subject to the tax, including air pollutants, water pollutants, solid waste, and noise. Carbon dioxide (CO2) is notably not included on the list of taxable pollutants.
Under the new law, the competent departments for environmental protection are required to regularly transfer information on pollutant-discharging institutions to taxation authorities. The taxation authorities, in turn, are responsible for collecting and managing environmental taxes and transferring taxpayers' information related to environmental protection taxes to the competent departments for environmental protection. The law also provides reduced tax rates for taxpayers who discharge taxable pollutants at concentrations less than the nationally or locally stipulated standards.
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The tax aims to increase enterprises' responsibility in pollution reduction
China has been collecting pollution discharge fees since 1979. In 2015, 17.3 billion yuan (about US$2.5 billion) in pollution discharge fees was reportedly collected from some 280,000 businesses. The current pollution discharge fee system provides only one category of reduction in the fee – taxpayers can receive 50% off the fee if they lower their air or water pollution by half of the national and provincial standards. The legal basis for collecting these fees is the Regulation on Pollution Discharge Fee Collection, Usage, and Management, issued in 2003, and relevant provincial regulations.
However, the pollution discharge fee system was replaced by a new environmental protection tax law, effective January 1, 2018. The new law aims to address the issues of ineffective enforcement in levying pollution discharge fees and to increase enterprises' responsibility in pollution reduction. Under the new law, entities directly discharging pollutants into the environment, including air pollutants, water pollutants, solid waste, and noise, are subject to the tax. The new law requires coordination of fee collection by the environmental protection authority and the tax authority.
The environmental protection tax law provides specific incentives for taxpayers to reduce their pollution levels. For example, if taxpayers discharge taxable atmospheric pollutants or water pollutants at a concentration of less than 30% of nationally or locally stipulated pollutant discharge standards, environmental taxes are levied at a reduced rate of 75%. If taxpayers discharge these pollutants at a concentration of less than 50% of the stipulated standards, taxes are levied at a reduced rate of 50%.
The new law also provides for the regular exchange of information between competent departments for environmental protection and taxation authorities. This includes information on pollutant-discharging institutions, such as their pollutant discharge licenses, data, and situations of violating environmental laws, as well as information on taxpayers related to environmental protection taxes, such as their tax declarations, paid taxes, tax reductions, and owed taxes. This regular exchange of information helps to ensure that enterprises are held accountable for their pollution levels and that environmental protection taxes are accurately assessed and collected.
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The tax is levied on entities discharging taxable pollutants into the environment
China has been collecting a pollution discharge fee since 1979. In 2015, 17.3 billion yuan (about US$2.5 billion) in pollution discharge fees was collected from 280,000 businesses. The legal basis for collecting these fees was the Regulation on Pollution Discharge Fee Collection, Usage, and Management, issued in 2003, and relevant provincial regulations. However, the pollution discharge fee system was replaced with a new environmental protection tax law, which came into effect on January 1, 2018.
The new law, called the Environmental Protection Tax Law, aims to address the issues of ineffective enforcement in levying pollution discharge fees and to increase enterprises' responsibility in pollution reduction. It applies to entities who directly discharge taxable pollutants into the environment, including air pollutants, water pollutants, solid waste, and noise. Carbon dioxide (CO2) is notably excluded from the list of taxable pollutants.
Under the Environmental Protection Tax Law, the obligation to pay taxes begins on the day the taxpayer discharges taxable pollutants. Taxpayers should declare and pay environmental protection taxes to the taxation authorities for the areas where the taxable pollutants have been discharged. The law provides specific measures for the declaration and payment of environmental protection taxes for taxpayers engaged in oceanographic projects who discharge pollutants into waters under the jurisdiction of the People's Republic of China.
The law also outlines reductions in tax rates for taxpayers who discharge taxable atmospheric or water pollutants at concentrations below the nationally or locally stipulated pollutant discharge standards. For example, if taxpayers reduce their air or water pollution by half of the national and provincial standards, they receive a 50% reduction in the fee owed. Similarly, a 25% reduction is provided if they lower their pollution by 30% below the prescribed standard.
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The tax excludes carbon dioxide (CO2) from its list of taxable pollutants
China has been collecting a pollution discharge fee since 1979, with 2015 seeing 17.3 billion yuan (about US$2.5 billion) in pollution discharge fees collected from 280,000 businesses. However, the pollution discharge fee system has been criticised for its ineffective enforcement in levying pollution discharge fees and lack of enterprise responsibility in pollution reduction.
In 2016, China's National People's Congress (NPC) Standing Committee passed the Environmental Protection Tax Law, which came into effect on January 1, 2018. This law replaced the existing pollution discharge fee system with a new environmental protection tax. The new law requires coordination between the environmental protection authority and the tax authority in collecting fees.
Under the Environmental Protection Tax Law, entities directly discharging taxable pollutants into the environment are subject to the environmental protection tax. The taxable pollutants are air and water pollutants, solid waste, and noise. Notably, carbon dioxide (CO2) is not included in the list of taxable pollutants.
The exclusion of CO2 from the list of taxable pollutants is significant, as carbon dioxide is a major greenhouse gas and contributor to climate change. While China has expressed a commitment to reducing carbon emissions and promoting low-carbon transportation, the decision to exclude CO2 from the tax may impact the effectiveness of these efforts.
The Environmental Protection Tax Law also provides incentives for taxpayers to reduce their pollution levels. For example, taxpayers can receive a 50% reduction in fees if they lower their air or water pollution by half of the national and provincial standards. Similarly, a 25% reduction is offered if taxpayers decrease their pollution by 30% below the prescribed standard.
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Frequently asked questions
The pollution discharge penalty fee system in China was a market-oriented environmental measure that charged entities that discharged pollutants into the environment. The system was in place from 1979 until 2018, when it was replaced by a new environmental protection tax.
The pollution discharge fee system was criticised for its ineffective enforcement in levying pollution discharge fees and for not incentivising enterprises to reduce pollution. There were also issues with the system's lack of flexibility, as it did not account for the different environmental and economic statuses of various provinces, autonomous regions, and municipalities.
Under the old system, taxpayers who discharged pollutants could receive a 50% reduction in fees if they lowered their air or water pollution by half of the national and provincial standards. They could also receive a 25% reduction if they lowered their pollution by 30% below the prescribed standard.
The new environmental protection tax, which came into effect on January 1, 2018, aims to increase enterprises' responsibility in pollution reduction. The new law requires coordination between the environmental protection authority and the tax authority in collecting fees. It also authorises provincial-level governments to determine and adjust the applicable tax amount on air and water pollution within a specified range.
