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    China Implements Environmental Protection Tax

    Incentives should encourage companies to cut emissions, experts say.

    China’s first tax specifically aimed at protecting the environment went into effect on Jan. 1, and experts are calling it an important but challenging step toward winning the battle against pollution.

    The environmental protection tax will adjust the tax levied from businesses depending on how much air, water, and even noise pollution they emit, according to legislation passed in December by the State Council, China’s cabinet. The central government will also allocate some of this tax revenue to local governments as an incentive to reduce pollution.

    Shi Zhengwen, a professor of tax law at China University of Political Science and Law in Beijing, told Sixth Tone that while the environment tax addresses existing problems, it also comes with high operational costs and technical complexities.

    “It’s very challenging,” said Shi, who was among the experts consulted during the drafting of the law. “[The government] will need additional human resources to carry out assessments in the long term, and not all of the existing technology is fully mature.”

    Shi explained that while some companies have already installed devices to measure pollutants and provide accurate data to the tax office, not all are equipped with such technology. “This makes the tax rates unclear, and so there could be continued conflicts and cheating,” he said.

    According to the new regulation, all levies are based on the amount of “taxable pollutants” a company produces. For example, they’ll have to pay a monthly tax of between 1.2 and 12 yuan per unit of air pollutants they emit — one unit being defined as 0.95 kilograms of nitrogen dioxide or sulphur dioxide — while sound polluters will be taxed between 350 and 11,200 yuan, depending on decibel levels.

    China has actually had a “pollutant discharge fee” in place since 1979, but Shi said the current law is more uniform and transparent — and as such it will “not allow companies to shirk their environmental responsibility.”

    Liu Meng, head of the Changsha-based nonprofit Shuguang Environmental Charity Development Center, told Sixth Tone that incentives in the form of tax breaks could encourage companies to become more conscious of reducing pollution levels. “But it all depends on how well it’s executed — that’s the key,” she said.

    The environment tax comes among a host of other measures to be adopted by the government in a bid to conserve natural resources and protect the environment. In November, China drafted a resource tax law that would use taxes to support the more responsible use of resources. Starting Dec. 1, the country rolled out its water resource tax pilot program in nine provinces and regions to strengthen water management by imposing tariffs on enterprises and individuals for excessive usage. Also beginning Jan. 1, China banned the import of 24 types of solid waste to “protect the environment and people’s health.”

    Additional reporting: Joyce Siu; editor: David Paulk.

    (Header image: A view of Shougang Corporation’s steelworks in Tangshan, Hebei province, Jan. 20, 2016. Xiaolu Chu/Getty Images/VCG)