China will speed up environmental protection tax legislation

Abstract Recently, the State Administration of Taxation conducted an investigation on environmental protection tax in Haidian District, Beijing. During the visit, officials listened to reports from the Beijing Municipal Bureau of Local Taxation and the Environmental Protection Bureau regarding the collection of environmental protection fees. They also discussed the progress of environmental tax reform. The next step is to further advance the legislative process for environmental protection tax, providing a solid foundation for future implementation.

With the growing urgency of smog control and water pollution prevention, the need for environmental tax reform has become more pressing. As a form of punitive taxation, the main objective of environmental protection tax is to ensure that polluters bear the cost of their environmental impact. Over time, the reform path has increasingly focused on legislative measures.

Under the "12th Five-Year Plan," it was proposed to impose environmental protection taxes on items with heavy regulatory responsibilities and well-established technical standards, gradually expanding the scope of taxation. The Third Plenary Session of the 18th CPC Central Committee called for the promotion of environmental protection fees. This year's government work report also emphasized the importance of advancing environmental protection tax legislation.

According to an official from the Policy and Regulation Department of the State Administration of Taxation, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Environmental Protection have actively worked on drafting environmental protection tax legislation. In 2013, they submitted a proposal to the State Council, and the Legislative Affairs Office of the State Council has been reviewing the draft based on public feedback. In the coming period, the departments will continue to cooperate with the Legislative Affairs Office to refine the proposal and submit it to the State Council for approval, eventually presenting it to the Standing Committee of the National People's Congress for deliberation.

At this year’s "Two Sessions," the deputy director of the Legislative Affairs Commission of the NPC Standing Committee also mentioned that the draft environmental protection tax law was prepared by relevant departments under the State Council. When conditions are favorable, the State Council will submit it to the NPC Standing Committee for discussion.

Although China currently has some taxes related to environmental protection—such as consumption tax, resource tax, and vehicle and vessel tax—it lacks specific taxes targeting pollution, environmental damage, or product classification. This real environmental protection tax has been widely implemented in many Western countries for years.

International environmental taxes typically include five categories: carbon tax, sulfur tax, water pollution tax, noise tax, and solid waste tax. The United States has long followed an environmental tax policy. Despite the increase in the number of vehicles, carbon dioxide emissions have decreased by 80% compared to the 1970s, significantly improving air quality.

“There are two major challenges in implementing environmental taxes in China,” said Bai Jingming, deputy director of the Ministry of Finance's Finance Department. “First, how to coordinate with other tax reforms such as resource tax and value-added tax; second, how to align with current environmental charges like sewage fees and mineral development protection fees. It can be said that the implementation of environmental tax involves all aspects of the fiscal and taxation system.”

Qi Dongsheng, deputy director of the State Administration of Taxation, added that environmental protection tax legislation must take into account resource environmental sustainability and social sustainable development. It should be implemented gradually across different sectors, playing a key role in pollution prevention and energy conservation.