New environment tax will hit businesses in China hard, say experts
From January 1 next year, large chemical and energy firms could end up paying four times more than previously for causing pollution
Businesses in China are being urged to prepare themselves for a new environmental tax that could hit many of them hard when it comes into effect at the start of next year.
China will abandon its current system under which polluters are charged locally in favour of the nationwide environmental protection levy – designed to reduce air, soil and water contamination – from January 1.
The new regime will see firms that cause pollution taxed under a uniform set of national rules rather than the fees being collected at the local level.
For instance, polluters nationwide will face a levy of between 1.2 yuan (18 US cents) and 12 yuan for every 0.95 kilogram of nitrogen oxide or sulphur dioxide they release.
Kenneth Leung, EY Greater China’s indirect tax leader, said the “fee to tax” shift could cost some large state-owned businesses in the chemicals and energy sector 40 per cent to 300 per cent more than they were paying under the previous system.
“Many businesses appear to be underprepared to cope with the new taxation and are lagging behind in adapting their operational procedures to factor in the impact from it,” Leung said.