Studies in Policy Choices and Interactions
Critical Issues in Environmental Taxation series
Edited by Larry Kreiser, Mikael S. Andersen, Birgitte E. Olsen, Stefan Speck, Janet E. Milne and Hope Ashiabor
Chapter 12: The impact of environmental tax on enterprise competitiveness in China
Jian Wu, Yujiao Mao and Xingjie Guo
China’s Pollution Levy System (PLS) has been implemented for more than 30 years. Under the context of environmental fiscal reform, the PLS was considered to be reformed into an environmental tax by three ministries (Ministry of Finance, Ministry of Environmental Protection and State Taxation Administration) since the 11th Five-Year Plan period (2005–2010). The first legislation draft was formulated and submitted to the State Council to formally initiate the legislation process in November 2013. With this reform, we expect to see a higher price on pollution as well as differences in many other aspects such as a unified rate across regions and different revenue-recycling effects. This chapter will discuss the industrial impact of the increased price rate on pollution due to this reform. Many studies predicted the macro effect of environmental tax in an economy. But what will be the micro-level impact of this tax on the competitiveness of enterprises? This chapter will take enterprises of four industries in a city in China (City S) as a case study, to understand the micro-level impact of environment tax on enterprises, by using the Environment-Competitiveness Matrix (ECM). City S is a typical industrial city located in Jing-Jin-Ji Area, a heavily polluted region.
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