Law on eco-taxes gains momentum

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Taxation on pollution and environmental damage – so-called “eco-taxes” – became a hot topic again during this year’s Liang Hui (annual meeting of the country’s legislature from March 5 to 15) when Jia Kang, former director of the Research Institute for Fiscal Science (RIFS) under the Ministry of Finance, again proposed speeding up work on legislation for eco-taxes. An official close to the Ministry of Finance said that works on legislation supporting eco-taxes is gaining pace and expected to be done in two years, but he also mentioned that experts and regulators are redoubling their efforts in the hope that it can be finished by the end of this year.

Lou Jiwei, the Minister of Finance, recently said that environmental taxation means replacing current fees with taxes. Scholars said this statement signals that if an eco-tax is introduced, it will convert current pollution fees into taxes, and many doubt simply replacing the pollution fees would stop environmental damage. Wang Jinnan, Deputy Director of the Chinese Academy of Environmental Planning under the Environmental Protection Ministry, said the current pollution fees, even if they are hiked, are too low to curb pollution. Wang has also headed a research team to study the policy framework for eco-taxes. In February, the team published a report that proposed four categories of taxes: pollution emissions; products causing pollution; ecological protection; and carbon dioxide emissions. However, in the current draft plan, only pollution emissions and carbon dioxide emissions are to be taxed.

Converting pollution fees into taxes will also lead to redefining responsibilities and authority between environmental protection and financial departments. Pollution fees have been an important source of income for local environmental protection departments, but they could soon lose this source of funding if the new policy is implemented. Some experts have suggested dividing the work by letting environmental departments make assessments while tax officers handle collections, but a source close to the drafting of the policy said there are many disagreements regarding details.