BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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Tax policy useful to tackle environment
(China Daily)
Updated: 2006-11-22 09:12 "Sustainable development" refers to the development model based on harmony between humanity's economic activities and nature. It also means that development today should not be achieved at the cost of later generations. This means harmony between the interests of people today and those of people in the future.
One of the most important attributes of sustainable development, therefore, is the cyclic use of resources and the benign cycles in which the environment functions. Taxation, among other things, is an important means indispensable to sustainable development. This is because environmental pollution, which drags most heavily at sustainable development, makes society pay much more dearly than individual polluting enterprises whose waste discharges contaminate the ecological system. There are two options to redress the situation. First, the government imposes stricter control on the polluters. Second, taxation measures are applied to make polluting enterprises pay more for the contamination they cause. To impose restraining rules and regulations on polluters, however, is highly expensive because relevant government departments have to get comprehensive knowledge on details of production means and technologies in polluting enterprises, which are distributed widely across various sectors, before they can work out the pollution-restraining rules. Taxation, however, is a market-oriented leverage, which encourages or discourages economic entities to do something or not to do something and therefore constitutes the most effective means. Taxation levers can increase polluters' production costs. In pursuit of the largest possible profits, enterprises, in the face of possible levies on pollution, have to adopt advanced technologies to reduce energy consumption and install waste-treatment equipment. On the one hand, taxation works to raise productivity and bring about more efficient use of resources while reducing pollution. On the other hand, income acquired from taxes levied on polluters can be channelled into environmental-protection undertakings. In addition, preferential tax treatment can be extended to those enterprises engaged in production that facilitates sustainable development. Development experience shows that free-of-charge use of the ecological system has to be reined in when economic growth reaches a certain height. In this scenario, the growth model has to be transformed to better handle the relationship between man and nature and between economic development and environmental protection. Although some tax policies that favour the development of a cyclic economy have already been put in place in China, many deficiencies exist. (For more biz stories, please visit Industries)
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