1. 环境保护部环境规划院 Policy Design of Environmental Tax in China Ge Chazhong Chinese Academy for Environmental Planning Nov 5, 2010 Bangkok

2. 环境保护部环境规划院 Outline General Thinking on Environmental Tax Overall progress of environmental tax in China Framework of Environmental Tax Policy Design of Environmental Tax Options Relationship between Environmental Tax and Pollution Levy Implementation Strategy

3. 环境保护部环境规划院 General Thinking on Environmental Tax Broad sense(3E) Establishing environmental tax; Establishing fiscal and preferential policies; Eliminating subsidies and environmental charge policies which are harmful for environmental protection. 3

4. 环境保护部环境规划院 General Thinking on Environmental Tax Narrow sense collect or cut taxes from whom engages in developing, protecting or utilizing environmental resources. 4

5. 环境保护部环境规划院 General Thinking on Environmental Tax Plays the role of: Raise fiscal revenue for governments; Be used as special-purpose fund for environmental protection; Change the polluter’s behaviors. 5

6. 环境保护部环境规划院 The Progress of Environmental Tax in China First, starting to learn international experience Then, conducting studies on environmental taxes Last, policy design – “the Environmental Tax Policy and Its Implementation Strategy ” 6

7. 环境保护部环境规划院 The Progress of Environmental Tax in China A long time work Relationship with other tax categories should be cleared up; Detailed investigation should be carried out; special training should be developed for tax authority staff.

8. 环境保护部环境规划院 Framework of Environmental Tax Policy Independent environmental tax plan; Integrated environmental tax plan; Environmental tax expenditure plan. 8

9. 环境保护部环境规划院 Framework of Environmental Tax Policy in China 9

10. 环境保护部环境规划院 Design of Environmental Tax Options Independent environmental tax plan 10

11. 环境保护部环境规划院 Independent Environmental Tax Plan --General Environmental Tax Based on the income with goal of collecting money for environmental protection; levy taxes on beneficiaries according to beneficiaries pay principle. 11

12. 环境保护部环境规划院 Independent Environmental Tax Plan --General Environmental Tax Taxpayer All impersonal entities or individuals who pay value added tax, consumption tax and sales tax are taxpayers Tax base based on the quantity of being paid for three taxes by taxpayer. Tax rate be 1%~4% of that of three taxes. Regulation of tax concession Tax concession is not allowed in environmental tax. 12

13. 环境保护部环境规划院 Independent Environmental Tax Plan --Direct Pollution Tax Based on the quantity of pollutants’ discharge; Accordant with the theoretical principle of environmental tax. 13

14. 环境保护部环境规划院 Independent Environmental Tax Plan --Direct Pollution Tax--Sulfur Dioxide Tax Object of taxation The behavior of sulfur dioxide emission. Taxpayer polluters who discharge sulfur dioxide into atmosphere, including industrial enterprises, institutions, business companies, service companies and other units. Tax base based on the real emission quantity of sulfur dioxide. Tax rate The tax rate of sulfur dioxide of coal is listed in table 1(with reference to study on how to make environmental tax policy in Beijing by CRAES) CollectionLocal taxation departments 14

15. 环境保护部环境规划院 Independent Environmental Tax Plan--Direct Pollution Tax-- Nitrogen Oxides Tax Taxpayer end users of coal-fired boiler and owners of motor vehicles. Tax base based on the real emission quantity of nitrogen oxides. Tax rate 1200 RMB / ton according to the sulfur dioxide tax rate and the charging standards for nitrogen oxides emissions established by CRAES in 1997. Collection Local taxation departments 15

16. 环境保护部环境规划院 Independent Environmental Tax Plan --Direct Pollution Tax-- Environmental Tax of Water Resource can be determined according to the scarcity of water resources and the cost for water pollution control. 16

17. 环境保护部环境规划院 Independent Environmental Tax Plan --Direct Pollution Tax-- Environmental Tax of Water Resource Object of taxation Water used as raw material or for living purpose. Taxpayerenterprises, institution and individuals who use water resources Tax basethe quantity of water consumed, or the real quantity of water supply Tax rate20%~30% of the water rate temporarily, which will changed to be differential tax rate according to the scarcity of water resources and water pollution conditions. CollectionState taxation departments 17

18. 环境保护部环境规划院 Independent Environmental Tax Plan --Direct Pollution Tax-- Polluting Products Tax Stimulate consumers to reduce the quantity of consumption of products with potential pollution; Encourage consumers to select products with no pollution or less pollution. 18

19. 环境保护部环境规划院 Independent Environmental Tax Plan --Direct Pollution Tax-- Polluting Products Tax Object of taxation All kinds of products or consumer goods which can cause environmental pollution, including chemical fertilizer, pesticide, phosphoric detergent, disposable woody tableware, battery with mercury and chrome etc. Taxpayer Consumers or users of the above-mentioned products Tax base The quantity of consumption and value of pollution products Tax rate implement differential rate by 1%~3%. Collection State taxation departments 19

20. 环境保护部环境规划院 Design of Environmental Tax Options Integrated Environmental Tax Plan which is functioning by reform and improvement of current tax categories, cooperate with environmental charge system as well. 20

21. 环境保护部环境规划院 Integrated Environmental Tax- Consumption Tax To Add new tax items: products with heavy pollution and large resource consumption are added, such as phosphate detergent, batteries containing mercury and cadmium, disposable tableware and plastic bags etc. To Implement differential tax rate for tax items of carbon and clean energy. 21

22. 环境保护部环境规划院 Integrated Environmental Tax- Consumption Tax The adjust ment of tax rate To increase consumption tax rate of gasoline and diesel oil, meanwhile considering the environmental cost. For cars with the same exhaust volume, differential treatments should be carried out according to whether if purifier to tail gas is installed. The tax rate of clean vehicles is at the low differential tax rate or exempted. 22

23. 环境保护部环境规划院 Integrated Environmental Tax- Resource Tax to adjust grading income and to promote rational exploitation and utilization of natural resources; has little effect on resources saving and protecting the eco-environment. 23

24. 环境保护部环境规划院 Integrated Environmental Tax- Resource Tax New tax items Tax item of freshwater resources includes the development and utilization of ground water and surface water. Tax item of forest resources. Tax item of grassland resources is added to levy tax on grassland development and utilization. The adjustment of tax rate Government should adjust tax rates of natural resources according to the scarcity of those resources and costs of ecological compensation. 24

25. 环境保护部环境规划院 Integrated Environmental Tax- Enterprises Income Tax Some preferential tax policies should be stated and given; The scope of preferential policies should be limited; Environmental protection administrations should play the leading role in identifying the qualification of applying those preferential policies. 25

26. 环境保护部环境规划院 Integrated Environmental Tax-Other Relevant Taxes City maintenan ce constructi on tax New tax item City maintenance construction tax will be levied upon in countrysides. The adjustmen t of tax rate Increase tax rate for environmental protection need only. Farmland use tax New tax item Be levied upon wetland use. Un- agriculture land in countryside is also listed under the scope of farmland use tax. The adjustmen t of tax rate Increase tax rate of farmland use tax to a larger extent; the tax rate of wetland use tax is high and the tax rate of un-agriculture land is low. Vehicle and vessel usage tax The adjustmen t of tax rate Increase tax rate; and to determine different tax rates according to the quantity of exhaust volume. 26

27. 环境保护部环境规划院 Integrated Environmental Tax- Environmental Tax Expenditure Policy The government can regulate some preferential treatments in tax system; Corresponding environmental tax expenditure policies should be established or supplemented on time; Preferential means should be enriched. 27

28. 环境保护部环境规划院 Integrated Environmental Tax- Environmental Tax Expenditure Policy Improving measures: To clarify the policy coverage to strengthen its pertinence; To adjust means and forms of preferential tax policy; To determine the preferential degree of environmental tax expenditure policy; To establish comprehensive preferential policies. 28

29. 环境保护部环境规划院 Environmental Tax and Charge Both have the same function mechanism; Some problems occurred in the process of implementation of environmental charge; The combined function will provide stronger stimulation; The environmental charge and environmental tax will coexist for a long time in China; Several important items in environmental charge could be transformed into tax. 29

30. 环境保护部环境规划院 Implementation Strategy STEP-STEP APPROACH: Easy first hard later, old first new later, integrated first independent later 30

31. 环境保护部环境规划院 Implementation Strategy To eliminate subsidies and preferential tax policies harmful to environmental protection; To give a comprehensive consideration on environmental tax and environmental charge; To carry out integrated environmental tax plan; To introduce independent environmental tax.

32. 环境保护部环境规划院 Implementation Strategy Piloting Program Ahead Polluting products tax; Coal consumption tax; Taking water resource into resource tax. 32

33. 环境保护部环境规划院 Implementation Strategy Other work to do: To resolve technical issues; To specify the management structure; To arouse the public awareness of environmental tax; To strengthen the fundamental work of environmental tax; To carry out further study on environmental tax. 33

34. 环境保护部环境规划院 Thank you! http://www.caep.org.cn 34