New environment tax will hit businesses in China hard
October 10, 2017 Category China News Round-up, Weekly
Businesses in China are being urged to prepare themselves for a new environmental tax that could hit many of them hard when it comes into effect at the start of next year.
China will abandon its current system under which polluters are charged locally in favor of the nationwide environmental protection levy – designed to reduce air, soil and water contamination – from January 1. The new regime will see firms that cause pollution taxed under a uniform set of national rules rather than the fees being collected at the local level. For instance, polluters nationwide will face a levy of between CNY1.2 and CNY12 for every 0.95 kilogram of nitrogen oxide or sulphur dioxide they release.
Kenneth Leung, EY Greater China’s indirect tax leader, said the “fee to tax” shift could cost some large state-owned businesses in the chemicals and energy sector 40% to 300% more than they were paying under the previous system. “Many businesses appear to be underprepared to cope with the new taxation and are lagging behind in adapting their operational procedures to factor in the impact from it,” Leung said. He urged businesses to carry out detailed assessments of the financial and operational impacts of the new levy as well as ways to enhance procedures and technologies aimed at reducing pollutants.
“If the new tax doesn’t lead to changes in business behavior, damage to the environment could continue and could end up being beyond remedy,” he said. “The impact could be more significant than tax revenue to the government, or profits or loss to businesses.”
The Ministry of Finance, State Administration of Taxation and Ministry of Environmental Protection in mid-August this year issued a joint edict on the implementation of the environmental protection tax, after public consultation, the South China Morning Post reports.
An earlier official study estimated the tax could bring in CNY50 billion a year, about three times the total raised from the fees collected from 280,000 companies in 2015. Between 2003 and 2015, China collected CNY211.6 billion in pollutant fees, Xinhua has reported previously.
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