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China's Green Tax System to Be Further Enhanced, with Levying of Environmental Protection Tax Kicking Off
 
2017-09-19

Issuance Date: August 11, 2017     Source: Economic Daily


The Environmental Protection Tax Law underscores an important effort to implement the concept of green development to promote the protection of the eco-environment, attracting wide attention from society.


As a new type of tax, the environmental protection tax differs largely from other types of taxes, and therefore requires special ways of collection and special technologies. The three departments' joint issuance of the Circular marks the formal kick-start of the preparation for the collection of environmental protection tax in all respects.


The Environmental Protection Tax Law will be officially implemented on January 1, 2018. The Ministry of Finance, the State Administration of Taxation (SAT), and the Ministry of Environmental Protection jointly issued a circular requiring every region to get well prepared for implementation of the Environmental Protection Tax Law.


Last December, the 25th Session of the Standing Committee of the 12th National People's Congress deliberated and passed the Environmental Protection Tax Law of the People's Republic of China, the first tax law since the third plenary session of the 18 CPC Central Committee. This law underscores an important effort to implement the concept of green development to promote the protection of the eco-environment, attracting wide attention from society.


The Environmental Protection Tax Law contains six chapters, namely, general provisions, tax base, tax payable, tax breaks, collection management and supplementary provisions, and 28 articles. Under the principle of "ensuring consistency between tax burdens before and after the reform", this law stipulates that the existing sewage discharge fees should be replaced with the environmental protection tax. As a key move to promote ecological progress in the fiscal and tax area, the levying of the environmental protection tax will further improve China's green tax system.


The joint issuance of the Circular by the three authorities marks the kickoff of the preparations for levying the environmental protection tax in all respects. The Circular clarifies that the preparatory work for different regions before the environmental protection tax is levied, and requires that the organization and leadership be strengthened and the multi-department collaboration mechanism be established under the leadership of the local people's governments, in order to define the roles and responsibilities of authorities involved for joint regulation and management and to ensure the smooth kick-start and advancement of the endeavor to collect the environmental protection tax.


According to the Law, the applicable tax rates on taxable air and water pollutants shall be determined and adjusted after the proposal within the range of tax rates set forth in the appendix of the law, Tax Items and Tax Amounts of Environmental Protection Tax, is made by the people's governments in provinces, autonomous regions and municipalities directly under the central government based on the local environmental carrying capacity, current state of pollutants discharged and the objectives of eco-development in the economy and society. Then the proposal shall be submitted to the standing committee of the people's congress of the same level for decision making and reported to the Standing Committee of the National People's Congress and the State Council for filing.


According to the Circular, the tax law shall be implemented through power delegation to determine the local tax rates applicable to taxable air and water pollutants, and the approaches to sample survey, estimation and tax collection at a fixed rate or in a fixed sum of taxable pollutant emissions. The environmental protection and tax authorities at various levels shall ensure the timely handover of archives and materials for the exchange and sharing of tax-related information data between tax and environmental protection authorities. In particular, tax authorities shall develop a thorough understanding of local tax sources and tax bases to build a basic tax source database as soon as possible.


As a new type of tax in China's current tax system, the environmental protection tax differs greatly from other types of taxes levied by tax authorities today, and therefore special tax collection and technology are required. The Circular stresses that tax authorities at various levels shall intensify internal learning and training to help tax staff get familiar with tax laws, policies and requirements, and also promote tax laws and provide more coaching and training to taxpayers so that they are able to file tax returns and know how.


"The environmental protection tax, a new type of tax, is levied based on the emissions of pollutants, featuring strong professionalism, difficult supervision and detection, and a lack of collection experience to refer to, and therefore, traditional approaches could hardly meet the needs of collection." From collection preparation to implementation of the environmental protection tax, every stage requires close cooperation among regional fiscal, environmental protection and tax authorities to ensure information sharing and mutual help in tax collection, said an official from the Property and Behavior Tax Department of the SAT.


The SAT has signed an MOU on Collaboration Mechanism for the Collection of Environmental Protection Tax with the Ministry of Environmental Protection not long before, establishing a collection collaboration mechanism at the department level. The Collaboration Mechanism clearly defines seven kinds of work that requires cooperation between tax and environmental protection authorities, highlights the key matters for the preparation of collecting environmental protection tax including releasing technical rules for the collection of environmental protection tax, formulating manuals on tax breaks policies, designing forms and certificates such as the declaration form for paying environmental protection tax, developing and building the core tax collection system and tax-related information sharing platform, guiding local tax authorities in making good preparation for collecting environmental protection tax and handover of archives and materials, jointly organizing and providing tax law promotions, business training and taxpayer coaching, and coordinating and implementing other matters that require collaboration in the collection of environmental protection tax.


The Circular jointly published by the three authorities clarifies the requirements on collection preparation and will further solidify the outcomes of the collaboration mechanism to build a good landscape featuring internal and external linkage and top-down promotion of tax collaboration.

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