Environmental Legislation Drives the Development of Ecological Civilization

The Environmental Protection Tax Law, which was passed in 2016, came into effect on January 1, 2018. Compared to previous fee-based systems, this law involved a higher degree of technical complexity. To address this, the law established a collection model in which tax authorities took charge of enforcement, while environmental agencies provided technical support. The model was based on the principles of enterprise self-declaration, tax collection, environmental monitoring, and data sharing.

Tax and environmental departments collaborated on tasks such as tax registration, determining taxable amounts, verifying declarations, and managing incentive policies. For manufacturers of fume purification systems, this regulatory shift highlighted the growing importance of pollution control in industrial compliance strategies.

From Fee to Tax: How the New System Operated

In practice, the tax collection process included:

- Self-reporting by enterprises

- Information sharing between tax and environmental departments

- Cross-checking of taxpayer declarations against environmental monitoring data

- Review of anomalies by environmental agencies

- Tax adjustments based on verification outcomes

According to Wang Jianfan, the Director General of the Tax Policy Department at the Ministry of Finance, “As a newly introduced tax with broad applicability, the shift from a fee to a tax system required extensive groundwork in both policy formulation and administrative systems.”

Preparations included:

- Drafting and issuing detailed implementation regulations

- Clarifying tax policies and collection procedures

- Allowing provincial-level governments to set specific tax rates and define taxable pollutants according to local needs

- Establishing a coordination mechanism between tax and environmental authorities

- Building and testing tax collection information systems

- Transferring taxpayer records and establishing a secure data exchange platform

Reinforcing Ecological Civilization Through Fiscal Policy

As the first standalone tax law passed by the Standing Committee of the National People’s Congress after the Third Plenary Session of the 18th CPC Central Committee, the Environmental Protection Tax Law played a key role in implementing the rule of law in taxation and advancing ecological progress.

Previously, China’s pollution discharge fees were earmarked for environmental projects. For example, in Anhui Province, environmental authorities allocated the collected fees across local, provincial, and national levels at a 75%–15%–10% ratio. The provincial finance department transferred 100% of its share to the environmental department to support pollution control efforts.

After the law took effect, under the revised Budget Law, tax revenues were incorporated into the general public budget, enabling more coordinated investments in social development and public welfare.

Wang Jianfan noted that although the environmental protection tax was no longer earmarked, the level of investment in pollution control and ecological protection remained strong. Expenses formerly covered by pollution fees were absorbed into local government budgets, with a clear mandate that environmental funding would not be reduced. In fact, public spending on environmental protection continued to increase.

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