Handbook of Research on Environmental Taxation
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Handbook of Research on Environmental Taxation

Edited by Janet E. Milne and Mikael S. Andersen

The Handbook of Research on Environmental Taxation captures the state of the art of research on environmental taxation. Written by 36 specialists in environmental taxation from 16 countries, it takes an interdisciplinary and international approach, focusing on issues that are universal to using taxation to achieve environmental goals.
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Chapter 17: Environmental taxation in China: the greening of an emerging economy

Yan Xu


According to some measures, China has achieved a ‘miracle’ in economic development since the late 1970s, when the ‘open door’ policy was launched in China. In 1994, China’s tax law system underwent a major overhaul to facilitate economic growth and to increase the government’s revenue-raising strength. The 1994 tax reform established a system that put indirect taxation, in particular the value added tax (VAT), at the pivot of the tax system, formulated a relatively comprehensive direct and indirect taxation regime, separated the state’s tax sources into central and local exclusive taxes, shared taxes between central and local governments, and split the state’s tax administration into central and local levels accordingly. This system remains in use today, though there have been various reforms of specific taxes in recent years. The tax law system can be viewed as a success in terms of generating revenues. But as it was designed, its major function is to exact money, while the role of allocating resources and thereby helping to protect the environment is relatively marginal. However, as a result of the economic boom, China’s environmental and ecological problems have become increasingly critical. China’s domestic environment has deteriorated rapidly, as the air and water have become polluted, and the land degraded and scarce. China has become the world’s largest producer of CO2 over the course of the last three decades. China has also changed from a major oil exporter in the 1980s to a net importer since 1993, and has become the biggest oil importer in the world in very recent years.

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