Reduce financial burden for green firms, political adviser suggests

China should accelerate environmental taxation reform and cut income tax for environmental protection companies to 15 percent, to ease the country's pollution problems and realize sustainable development, a political adviser has suggested.

Jia Kang, a member of the National Committee of the Chinese People's Political Consultative Conference and head of the Ministry of Finance's Research Institute for Fiscal Science, submitted a proposal to the committee to reduce the tax burden for environmental protection companies, which are usually medium or small-scale enterprises.

"Preferential tax treatment is the most direct and effective way to boost the environmental protection industry, which can help those companies with operational capital shortage and encourage private investors' enthusiasm for the industry," Jia said.

The main tax for companies is income tax, with a rate of 25 percent, and Jia suggested this should be reduced to 15 percent.

"During China's environmental taxation reform during the 12th Five-Year Plan (2011-15), carbon tax is the key," he said.

China should impose the carbon tax, based on a company's annual total carbon emissions, through comprehensive information collected on its business and operations. The rate could start at about 5 yuan (79 cents) to 10 yuan a metric ton, he added.

In recent months, China's air, water and soil pollution problems have attracted increasing public attention, triggering heated debate in the environmental industry on the contribution companies can make to create a better environment.

On the opening day of the CPPCC National Committee session on Sunday, the China Environment Service Industry Association under the All-China Federation of Industry and Commerce said the nation's environmental protection companies have the ability to solve its pollution problem in 10 to 20 years.

In the next 10 years, the country should ensure the investment of 2 to 3 percent of its gross domestic product in the environmental protection sector, with about 10 trillion yuan in total, said Wen Yibo, head of the association and president of Sound Group, an environmental protection company in Beijing.

"We have to deal with the environmental pollution we have caused in the past 30 years and at the same time we need to solve the new pollution we are creating," he said. "We owe the environment too much. Investment of 2 percent of GDP is a minimum, and even so, China cannot currently reach the standard."

In recent years, the nation's environmental protection companies have seen fast growth.

According to the association, up to half of the country's sewage treatment, 65 percent of waste incineration and 13 percent of desulfurization in power plants is invested and operated by professional environmental protection companies.

"The industry has made progress," said Wen. "However, when we develop to a certain level, we will face more technological challenges, which will also bring great potential for the industry."

The association also suggests that China accelerate the amendment of environmental protection laws and complete regulations on emission limits.

"To increase public participation and transparency as well as protect the public interest with laws is important to the development of the environmental protection industry," said Wen.

Wang Yi, a deputy to the National People's Congress and deputy director of the Institute of Policy and Management at the Chinese Academy of Sciences, said: "At present, the amendment of laws concerning environmental protection supervision is far from satisfactory." He said the target of solving the pollution problem in 10 to 20 years can be reached if the government shows strong determination to increase investment.

He added that he will submit a motion to the NPC about the safety of drinking water.