lagging behind or catching up? —a comparison of chinese and european environmentally related taxes
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Lagging Behind or Catching Up? —A Comparison of Chinese and European Environmentally Related Taxes. Kris Bachus, University of Leuven, Belgium Jing Cao, Tsinghua University, Beijing, China. Outline. Introduction Transport fuel taxes in Belgium and China Political Economy Comparison - PowerPoint PPT PresentationTRANSCRIPT
Lagging Behind or Catching Up?—A Comparison of Chinese and
European Environmentally Related Taxes
Kris Bachus, University of Leuven, Belgium
Jing Cao, Tsinghua University, Beijing, China
Outline1. Introduction
2. Transport fuel taxes in Belgium and China
3. Political Economy Comparison1. China: NDRC
2. Belgium: agreement between government and oil sector
4. Conclusion and future prospects
1. IntroductionChina’s Environmental Damage:
Source: Wang Jinnan, Chinese Academy of Environmental Planning, MOF-OECD Workshop on Environmental Tax, 2010.10.26
ERT in Belgium and China
Environmentally related tax revenue as a % of total taxation
Environmentally related tax revenue as a % of GDP
Pollution Levy System in China (history)
Levy System (5 Stages) 1978-1981: trial program on Pollution Levy
System 1982-1987: extend trial program to the whole
country 1988-1993: Capacity building and Deepening
Existing System 1994-2002: explore reform, Acid Rain
control zone trial program Since 2003: Levy Reform
2007 , State Council - 《 Work Plan on Energy Saving and pollution Reduction 》 - announcing the Chinese government will implement environmental tax policy
2006 , State Council – in 11th Five Year Plan- “Consider Environmental Protection Needs in further Reform of Resource Tax, Consumption Tax, Import/Export Tariff, and Explore Environmental Tax Reform”
May 2009, State Council (via NDRC) announced to study the implementation of an environmental Tax
May 2010, State Council (via NDRC) announced to study “Detail Plan on Resource Tax Reform, Steadily Introduce Property Tax Reform, Finalized Consumption Tax Reform and Study Detail Plans for Environmental Tax Reform”
Environmental Tax Reform in China (History)
Revenue of Vehicle Tax from 2001 to 2008 (0.1BY)Blue – Tax on Vehicles and vessel tax (local)
Red – Vehicle Purchase Tax
8
Source: Wang Jinnan, Chinese Academy of Environmental Planning, MOF-OECD Workshop on Environmental Tax, 2010.10.26
Implicit tax rate on energy
Energy and labour taxation in Belgium
Implicit tax rates: Energy: ranked 22 in EU27 Labour: ranked 2 in EU 27
Room for ETR
China vs BelgiumVAT Labor Tax Pollution
(Tax Base)WTP
China High Low High Low
Belgium Low High Low High
China’s fiscal structure is very different from Belgium or other OECD countries. VAT + Business Tax counts for 46% of total tax revenue, while labor income tax counts for only 6.6% in 2009. Revenue Recycling with VAT/BT will result in different fiscal outcome compared to Europe.
Baseline Pollution Level is very high in China, while the willingness to pay is low, and abatement costs are lower in China.
All of these need to be taken into account when comparing with Europe case, and the likely negative distribution impacts need to be addressed considering China is a high Gini country.
2. Fuel tax rates in Belgium and China
(euro, current prices)
Excise rates transport fuels, deflated
Euro, 1983 prices
Current fuel tax rates
2009 China tax fuel reform Tax rate increased from 0.2 yuan/liter to 0.8 for
diesel, 1.0 for unleaded and 1.4 for leaded gasoline
Part of the increase is adjustment for inflation after 26 year of unchanged rate
Other part of the increase is a actually a shift away from a number of fuel and other transport related charges?
Disagreement within government
3. Political Economy
“Polluter Pays Principle” China’s Hierarchy Environmental
Regulation Structure Belgium: oil sector ↔ China: lobby of
government departments and local governments (provincial + municipal)
Fuel price setting
Belgium: Taxes: ministry of finance & government
China: NDRC sets the price Less responsive to international oil price
fluctuations (just a few adjustments per year, compared to 35 in Belgium)
Ministry of finance sets tax rate
Oil price and fuel prices
4. Conclusion and future prospects Belgium: old government had plans for
modest ETR, but now waiting for the new government.
China Reform levy to tax Carbon tax? 12th 5-year plan