Latest Progress Review of China's Environmental Protection Tax Policy Implementation

Abstract

A series of economic, social and political issues have arisen with the aggravation of environmental issues. The public's higher expectations and requirements for environmental quality urge the reform for the most stringent environmental management system, which expedites the environmental tax reform. Pollutant discharge fee (PDF) is the earliest economic means adopted for environmental purpose in China. It has made important contributions to the cause of environmental protection by encouraging businesses to strengthen environmental management and reduce pollutant emissions, and raising environmental protection funds. However, some problems were revealed in the actual implementation process, such as insufficient enforcement rigidity, intervention of local governments and departments, and negotiated payment. On January 1, 2018, China launched the environmental protection tax (EPT) policy, which was China's first green tax aimed at environmental protection, putting an end to PDF that had been in effect for the past 40 years. The policy sets different pollutant equivalent values (PEVs) for pollution factors with different levels of hazard to tax high-hazard pollution factors more heavily. This regulates corporate behavior of pollutant discharge and encourages businesses to reduce pollutant emissions. By mean of rigid taxation, the policy gives full play to its regulatory functions. Overall, the EPT policy has been smoothly implemented for over one year, with some problems encountered in the process. The paper will evaluate the policy impacts in the first year, summarize experiences and identify problems in a timely manner, and propose measures to optimize the policy design and recommendations on tax collection and management, in the hope of facilitating further reform and innovation of China's environmental tax policy.