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China’s new pollution tax excludes greenhouse gases

December 26, 2016

China has enacted a series of taxes on various types of industrial pollution. But to the dismay of even some of its own government researchers, carbon dioxide and other greenhouse gases are not included in the tax plan.

Industrial pollution_Graeme Maclean via Flickr

Some specific emissions could mean tax bills for Chinese companies under a new pollution tax law just enacted by that country. (Photo by Graeme Maclean via Flickr CC)

Still, for the first time ever, public institutions and companies that discharge listed pollutants directly into the environment will face specific environmental protection taxes.

Some air, water pollutants targeted: Under the law passed Dec. 25 by China's National People's Congress, emissions of such things as sulphur dioxide and sulfite will be taxed at 1.2 yuan (17 cents U.S. dollar) per unit when released into the air and 1.4 yuan (20 cents U.S.) if discharged into the country's waterways.

A 5-yuan-per-ton (72-cents-per-ton U.S.) tax will apply to coal waste, as will a 1,000-yuan-per-ton tax of 1,000 yuan (almost $144 U.S.) for hazardous waste.

The new tax rates will take effect Jan. 1, 2018.

Provincial-level governments can raise the rates for air and water pollution by up to 10 times after approval by the local legislatures. Lower rates may also apply if emissions are less than national standards.

Taxing path to cleaner environment: "Tax revenue is an important economic means to promote environmental protection," according to a Finance Ministry statement on the new law.

China has not previously imposed any specific environmental taxes, but instead uses a system of miscellaneous charges. Many, apparently including the country's lawmakers, felt that the current system's fees were too low to deter polluters.

"The core purpose (of the new policy) isn't to increase taxes, but is to improve the system, and encourage enterprises to reduce emissions," Environment Minister Chen Jining said earlier this year per a report in Shenzhen Daily. "The more they emit the more they will pay, and the less they emit the less they will pay."

That cleaner air goal was reiterated following the law's approval by Wang Jianfan, director of the Ministry of Finance tax policy department, who called the tax key to fighting pollution.

China's new tax law is expected to force companies to upgrade technology and shift to cleaner production, Wang told a press conference.

Currently collecting a fee: China has collected a pollutant discharge fee since 1979. In 2015, it collected 17.3 billion yuan ($2.5 billion U.S.) from some 280,000 businesses.

But switching to the specific tax system took a while, with debates between the Ministry of Environmental Protection, the Ministry of Finance, the State Taxation Administration and local governments forcing delays in the new tax law.

A major sticking point was that some government agencies will lose money when the current system of emission discharge fees is abolished. There also was concern among some government researchers that carbon dioxide and other greenhouse gases were not included in the new tax plan.

Greenhouse gas still OK: China leads the world in emission or greenhouse gases, primarily because of its reliance on coal to provide electricity to its 1.37 billion residents. The United States a close second in greenhouse gas emissions, according to United Nations data.

Most scientists agree that the gases are causing the earth's temperatures to rise.

Will the new, limited pollution taxes pave the way for similar action in China against greenhouse gases?

That likely will depend on how successful the taxes are at cleaning up the types of pollution specified by the new law.

It also will depend on how much better or worse pollution becomes in China.

Just last week, cities across China's northeast were placed on an air pollution red alert, an action that included taking large numbers of cars off the road and closing some factories.

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It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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