Study on Design of Wastewater Tax: from Wastewater Pollutant Discharge Levy to Environmental Tax

1. Study on Design of Wastewater Tax: from Wastewater Pollutant Discharge Levy to Environmental Tax Ge Chazhong Chinese Academy For Environmental Planning Nov 4, 2010 Bangkok

2. Why This Topic? • Governme Research topic under National Water Pollution Control Key Special Program for 11th five year period • ntal decision on introducing environmental tax • Issues related to pollution levy on water pollutants discharge

3. Presentation Outline • Brief introduction • Comparison • Design • Obstacle • Conclusion

4. I. Brief introduction of China’s wastewater pollutant discharge levy policy

5. I. Brief introduction The first economic policy for environmental protection in China • In late 1970s • “polluter pay principle” • According to the amount of pollutants discharged using pollutant equevelents • played a positive role

6. I. Brief introduction • Nationwide policy • 31 provincial level • 333 prefecture level • 2,860 county level cities

7. I. Brief introduction • 80.775 billion Yuan (RMB)(From the new regulation in 2003 to the end of June 2009) including water and air pollutants as well as solid wastes • 147.95 billion Yuan (RMB)(the cumulatively fees in about 30 years from 1982)

8. Figure 1 Water Pollution Discharge fee Collection in 2004-2009 (Data source: Statistical Yearbook on Environment for All Years)

9. I. Brief introduction • wastewater and waste gas large proportion • wastewater pollutant discharge fee a down trend • waste gas an upward trend • noise and hazardous waste a very small proportion and does not change considerably

10. I. Brief introduction Causes of declining trend for water pollutant • urban wastewater treatment facilities being put into use • New policies on reducing emissions from “concentration control ” to “ total quantity control ”

11. I. Brief introduction Need to improve • Legal basis for discharge levy system is insufficient • Pollutant discharge charge rates are low and levied scopes are incomplete • Levy procedure is complicated and workload is high

12. II. Comparison between wastewater pollutant discharge levy and environmental tax

13. II. Comparison • Both are economic instruments in accordance with the principle of “polluter pay principle” • Both can contribute to pollution reduction through internalizing external cost

14. II. Comparison differences • different roles • different recognitions • different departments for implementing these policies • different use of funds

15. Can wastewater tax solve problems of low collection rate of wastewater pollutant discharge levy???

16. II. Comparison • can raise the collection rate to some extent • may not be quickly raised to a very high level due to different reasons for current low collection rate

17. III. Design for wastewater tax

18. III. Design basic principles to design wastewater tax: • Effectiveness • Fairness • Operability Effectiveness Simple tax base Stable revenue

19. III. Design Collection object and scope • wastewater discharged from pollution sources, including industrial ones and urban WWTPs

20. III. Design Taxpayer • all those that discharge wastewater to water body, including industrial enterprises, public institutions, commercial and service enterprises, wastewater treatment plants and other organizations and excluding residents.

21. III. Design Tax base and its calculation • wastewater emission quantity Tax amount payable = wastewater emission quantity ×industrial pollution intensity factor × unit tax amount

22. III. Design

23. III. Design • Enterprises have the emission quantity data by monitoring and being verified by environmental protection departments, the quantity data should be used first as tax base. • Otherwise, follow this formula : Wastewater emission quantity = water intake quantity (product yield) ×wastewater emission factor

24. III. Design Tax rate • 0.2Yuan(RMB)/ton • Tax rate should be determined to be higher than pollution treatment cost and enterprises’ bearing capability should be considered • In the preliminary stage it can be approximately equivalent to the present discharge levy rates

25. III. Design Tax preference • The enterprises that adopt advanced technologies and install and normally operate wastewater treatment system should be given preferential policies

26. (III) Comparison between wastewater emission tax amount and discharge fee collection amount

27. IV. Analyze the obstacle for changing wastewater pollutant discharge fee to wastewater tax

28. IV. The obstacle Institutional obstacle • The relationship between environmental protection departments and pollution emitting enterprises will be greatly reduced • The deterrence of environmental protection departments is weakened • How to balance the benefits of different regions is a difficulty

29. IV. The obstacle Technical obstacle • Emission collection rate is difficult to be directly converted to tax rate • Tax base of wastewater tax is difficult to be calculated

30. IV. The obstacle Policy coordination • Its combination with financial system reform must be considered • It is necessary to consider how to ensure the fund for environmental protection investment through financial policies • It is necessary to accurately deal with relations with present value added tax, consumption tax, resource tax, customs dues and income tax

31. V. Conclusion

32. V. Conclusion Compared with charge, tax has some advantages: • Tax collection to some extent can overcome charge randomness, arrears and refusal to pay • Combining wastewater tax with other taxes can save collection cost

33. V. Conclusion • Some obstacles still exist in converting discharge fees into environmental tax

34. V. Conclusion • It is inappropriate to convert wastewater pollutant discharge levy to wastewater tax in the near term.

35. Thank you! Please visit http://www.caep.org.cn E-mail:gecz@caep.org.cn