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Chinese farms face new environment tax

Post a commentBy Mark Godfrey , 09-Jan-2017

The environmental impact of pig farming means producers face large tax bills
The environmental impact of pig farming means producers face large tax bills

China’s pig sector looks set to be restrained by a new environmental tax to pay for proper handling of effluent.

The Ministry of Environmental Protection in Beijing has announced a tax of RMB1.40 per pig, which will be payable from 2018 as part of an environment tax on pig farms of 500 or more head of pigs.

The Environment Protection Tax Law was passed late last month by the People’s Congress Standing Committee – the lawmaking unit of China’s National People’s Congress, which meets each spring for a week – and will take effect from 1 January 2018. The tax will apply to farms with 50 cows, 500 pigs or 5,000 birds.
 
The Chinese government is projecting that the new tax will raise RMB50 billion per year to help clean China’s notoriously polluted waterways. A note with the announcement explained how the tax was aimed at “getting more companies to pay more taxes on sewage”, but it also encourages reduction and conversion of slurry into dried products for organic manure.

Nitrate levels
 
The tax will be levied according to the amount of effluent produced: farmers can also apply for tax exemptions if they install waste treatment plants on their farms that meet national wastewater treatment standards. Nitrate levels from pig slurry are much higher than those from all other manure, with the exception of poultry.
 
Taxes could prove costly for transgressors: while the water pollution tax is RMB1.40 per pig, farms also face an air pollutant tax of RMB1.20 per pollution equivalent. There’s also a separate solid waste tax. Air and water pollution from farms will be determined by a pollution equivalent number according to the amount of pollution produced, with precise details still to be ironed out.

While the new tax code exempts small-scale farms, it does cite “the impact of large-scale farming on the rural environment” as a reason why taxes will apply to larger farms. This is despite the fact that, in recent years, central and local governments have promoted “large-scale” farms as a way to increase the quality and quantity of Chinese meat supply.

The new tax code could have a significant bearing on mid-sized farms: a farm of 500 pigs would pay RMB1.40 per pig, facing a tax bill of RMB700 in water pollution taxes alone. However, the regulations do leave room for farmers to reduce their bills where “pollutant concentration” is kept below 50% of emission standards. Local governments, meanwhile, are given the option of cutting the taxes by half if the concentration of water pollutants is lower than 50% of the national or local pollutant discharge standard.

'Serious consequences'

The government statement announcing the enactment next year promises “serious consequences” for those who don’t pay the tax, which will be collected by national tax authorities. The new tax code was drafted by the Ministry of Finance, the State Administration of Taxation, and the Ministry of Environmental Protection.

While Chinese laws have long suffered from patchy enforcement at a local level, taxpayers who fail to declare and pay the new environment tax and cause “major damage” face large fines, jail and a shutdown of their farms.

Given that the world’s number one pig producer faces the twin problems of water pollution and scarcity, it’s perhaps not surprising that China has set innovation and green development as key priorities in its 13th Five Year Plan, which runs from 2016 to 2020.

As well as shutting unlicensed pig farms, the country is trying to establish a national database of water quality in order to monitor and combat pollution, while also forcing local officials to enact national legislation. The first data under the system is to be published later this year.

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