The proposal on levying environmental tax has been passed unanimously by the Ministry of Finance, State Administration of Taxation and Ministry of Environmental Protection (MEP) and has now been submitted to the State Council for approval. Authoritative sources pointed out that according to the proposal, environmental tax will be levied on sulphur dioxide and wastewater first, whereby specific tax is levied based on the volume of the pollutants discharged and the tax burden is similar to the current pollutant discharge fee. The relevant policy will be introduced in 2011 at the earliest.

It is understood that environmental tax is likely to be collected along the lines of "fee turned tax". In other words, in the initial stage, the discharge fee for pollutants such as sulphur dioxide and wastewater which are regularly discharged in large volumes will be converted to tax, while the discharge fee for other pollutants will remain according to existing rules.

It is worth noting that in the latest environmental tax proposal submitted, carbon tax is not included. Before, some people reckoned that in view of increasing concern over carbon dioxide emission reduction in the international arena, China should include carbon dioxide emission in its environmental tax adjustment in a bid to promote its economic development to move towards low-carbon.

It is generally believed that like other taxes, environmental tax will to a certain extent increase the tax burden of the target taxpayers. Hence, once this tax is introduced, the impact on related industries and enterprises will definitely arouse concern.

According to sources from the Chinese Academy for Environmental Planning under MEP, the proposal on the environmental tax system has taken into full consideration the actual situation and tax management of pollutant discharging enterprises. A responsible person from MEP also pointed out that the levy of environmental tax will not increase the tax burden of enterprises.

Under normal circumstances, the degree of impact of environmental tax on enterprises depends on the scope of collection of the tax, and it also depends on the tax rate. As the scope of environmental tax is set, the higher the tax rate the bigger is the impact on enterprises.