Pilot program will be extended to nine more provincial-level regions

China will expand the water resource tax pilot program into nine additional provincial-level regions beginning this month, to strengthen the government's management of water resources, preventing wastage and pollution, as a measure to get high-water-consumption industries to shift growth models, the Ministry of Finance said on Nov 28.

The new provincial-level regions to join the pilot program are Beijing, Tianjin, Shanxi, Shandong, Henan, Sichuan, Shaanxi, the Ningxia Hui autonomous region and the Inner Mongolia autonomous region. Hebei was the first province to levy a tax on water resources, having done so since July 1, 2016, said a statement on the ministry's website.

The tax will be collected based on usage of surface and underground water in these areas, and the income will go to local governments, it said.

The statement also stressed that local governments will be authorized to set specific tax rates within certain ranges. Beijing, for example, will levy an average tax of 1.6 yuan ($0.24; 0.2 euro; ￡0.18) per cubic meter as the lower limit for surface water and 4 yuan per cu m for underground water, which is the highest level among all the nine provincial-level regions.

The amount of tax to be paid for some particular industries, including car-washes, golf courses and ski resorts, will be set at a much higher level.

Wang Jianfan, director of the department of tax policies of the Ministry of Finance, tells China Daily that this reform is a "parallel" shift of the previous administrative fee for water resources that have been collected by local water resource management departments, into compulsory taxes that will be compulsorily imposed by the government, while "no further tax burden will be added on either enterprises or residential individuals, so it will not change the current water price".

"Once the pilot program is mature enough, it will expand nationwide," he adds.

Tax exemption will be given in some areas, including agriculture production using a limited quota of water, recycled water through wastewater treatment, and some water used by the military, according to the Finance Ministry.

Cai Zili, director of the Property and Behavior Taxation Department of the State Administration of Taxation, says the aim of levying the water resource tax is not to increase fiscal income, but to better leverage the tax adjustment function to promote rational development and usage of water resources, while curbing overuse.

He says that in the last year, water resource administrative fees in the nine regions totaled 13.3 billion yuan.

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(China Daily European Weekly 12/01/2017 page25)