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This article analyzes the characteristics of environmental protection tax policies in developed Western countries. In light of the shortcomings in China’s current environmental protection tax policies, it suggests that China should draw on the successful practices of those Western countries, adhere to a step-by-step approach, take practical considerations into account, and follow the principle of neutrality. During environmental tax reforms, it is important to establish a sound market system; when designing environmental taxes, attention should be paid to the diversity of tax measures and to the optimization of tax rates. In terms of the implementation of environmental taxes, consideration must be given to how the revenues generated are used, the levels of management involved, and various related coordination issues. Since the 1990s, economically developed countries, especially those members of the Organization for Economic Co-operation and Development (OECD), have widely utilized economic policies such as taxes, fees, emissions trading, and deposits to protect the environment. The latest trend in economic policy is to use fiscal and tax policies as a breakthrough to address environmental issues. From the perspective of fiscal and tax policies, to address environmental issues and achieve sustainable development, it is necessary to establish and improve environmental taxes, so that the entire tax system reflects environmental protection requirements. I. Main Contents and Characteristics of Western Environmental Protection Tax Policies Environmental taxes, as an important tool for **macroeconomic regulation, draw their economic principles primarily from Pigou taxes. Looking at the specific implementation of environmental taxes abroad, it generally went through three stages: 1. From the 1970s to the early 1980s. During this period, environmental taxes mainly took the form of fees to cover costs. It arises primarily based on the principle of \"polluter pays,\" which requires those who emit pollutants to bear the costs of monitoring such emissions. The forms it takes include user fees and charges for specific uses; it does not yet constitute a typical environmental tax, but can be considered a precursor to one. 2. The 1980s to the mid-1990s. During this period, the types of environmental taxes increased steadily, with taxes such as pollution taxes, product taxes, energy taxes, carbon dioxide taxes, and sulfur dioxide taxes emerging one after another. Functionally, it takes into account both guiding and financial functions. 3. Mid-1990s to the present. This period was one of rapid development of environmental taxes; in order to implement sustainable development strategies, countries adopted fiscal and tax policies that favored environmental protection, and many also carried out comprehensive reforms of their environmental tax systems. Overall, it is becoming increasingly common for countries around the world to impose environmental taxes, and the process of integrating environmental taxes and fees is accelerating. However, due to differences in national conditions, levels of social and economic development, and environmental challenges faced by various countries, there are significant variations in environmental protection policies as well as in the specific tax structures that reflect environmental management approaches. The types of taxes imposed and the methods used to collect them vary widely from one country to another. The following is a brief introduction to several relatively representative **. (1) United States In 1971, the U.S. Congress introduced a proposal to impose taxes on emissions of sulfides into the environment across the country, and in 1987 it suggested imposing taxes on emissions of sulfur monoxide and nitrogen monoxide. Since then, the United States has **gradually introduced tax measures in the field of environmental protection, and to date a relatively comprehensive system of environmental taxes has been established. These include consumption taxes on chemicals that damage the ozone layer, gasoline taxes, taxes and fees related to vehicle use (such as consumption taxes on trucks and trailers, tire taxes, etc.), mining taxes, taxes and fees for solid waste disposal, sulfur dioxide taxes, environmental revenue taxes, as well as numerous tax incentives related to environmental protection. In terms of collection and management, the United States has very strict regulations regarding the collection of environmental taxes. It is collected uniformly by the tax authorities and deposited with the Ministry of Finance, which allocates it between the regular fund budget and trust funds, with the latter being transferred to the underlying super funds. Due to the centralized nature of the tax collection agencies and the high level of modernization in their collection methods, defaulting on or evading environmental taxes is rare in the United States, and the amount of environmental taxes collected shows an upward trend year by year. The country’s environmental taxes have played a significant role in environmental protection, thanks to their focused approach and well-developed institutional framework. (II) Netherlands The Netherlands is renowned worldwide for its beautiful environment, and it was one of the first countries in the OECD to introduce environmental taxes. Most environmental taxes in the Netherlands are taxes designed for specific purposes; they are characterized by being relatively minor in scale. The tax rates for various environmental taxes are clearly and meticulously defined, and there is a large number of such taxes that affect all aspects of people’s lives. With the improvement and rapid development of the Dutch environmental tax system, the share of revenue generated by environmental taxes in total tax revenues has continued to increase, rising from 1.22% in 1996 to 14% in 2004, accounting for 3.5% of GDP. At the same time, most environmental taxes in the Netherlands are purpose-specific taxes; therefore, the revenue generated from them is used as dedicated funds that are allocated exclusively for environmental protection purposes. Furthermore, when establishing environmental taxes, the Netherlands took into full account that taxing different consumption patterns of the same product would have varying impacts on the environment; as a result, it introduced tax exemptions for those behaviors that have little impact on the environment, thereby effectively fulfilling its role in protecting the environment. The taxes in the Netherlands that are specifically designed for environmental protection include: fuel tax, energy regulation tax, uranium tax, water pollution tax, groundwater tax, waste tax, garbage tax, noise tax, excess manure tax, dog tax, and others. In practice, given the differences between the central and local authorities in terms of the objectives and conditions for taxation, the country has granted local authorities considerable flexibility in the administration of environmental taxes. It has also ensured good coordination between the tax authorities and various environmental and resource management agencies, thereby enabling efficient collection of environmental taxes in the Netherlands. (III) Poland As a developing country in a transition period, just like my own country, Poland introduced environmental taxes and resource taxes starting in 1970, with the aim of motivating polluters to change their behavior. However, due to the low tax rates at the beginning, and especially because of the ongoing planned economy system, both production and consumption responded very weakly to price signals; as a result, environmental taxes were unable to function effectively through price mechanisms, and instead served mainly to raise funds for environmental investments and pollution reduction projects. Subsequently, in 1989, 1990, and 1992, environmental taxes were reformed again, with the tax rates increased significantly and the collection system strengthened. Poland relies primarily on a mixed system of environmental standards combined with environmental taxes and taxes on (natural) resources to address environmental issues. A key feature is the wide scope of its pollution taxes and (natural) resource taxes. Currently, the country imposes pollution taxes on hundreds of pollutants, with the main ones being three types: SO2, NOx, and salt-containing water used in coal mining. Tax rates are set based on the level of harm caused by pollutants, and are increased in proportion over time; meanwhile, new tax rates for pollutants are determined by referring to the existing tax rates for such pollutants. The main pollution taxes in Poland have always had relatively high rates; for example, the tax on sulfur dioxide, which constitutes its main source of revenue, has been above 70 dollars per ton of SO2 since 1991, and this rate is also high compared to that of most countries in the OECD. In addition to the breadth of taxation, another key feature is the system that returns tax revenues to enterprises and municipalities through special environmental funds for specific purposes; the implementation of this system is considered to be the main reason for the substantial increase in environmental investment expenditures. Poland has three levels of environmental funds: the **Environmental Protection Fund and Water Resources Management Fund** (i.e., the **Fund**), 49 regional environmental funds, and over 2,400 municipal environmental funds. Revenues from pollution taxes, water extraction fees, waste disposal fees, tree-cutting taxes, and geological fees are allocated according to clear budgets among funds at different levels. II. Shortcomings in China’s environmental protection tax policies In China’s current tax system, only resource taxes, consumption taxes, urban maintenance and construction taxes, taxes aimed at regulating investment in fixed assets, urban land use taxes, and taxes on the occupation of arable land are considered environmental taxes; however, their original design was not intended for environmental management. It can be said that there is no tax specifically designed for environmental management in our country’s tax system, and the awareness of environmental protection is also weak when formulating other tax policies. (1) There is a lack of specific taxes imposed on behaviors or products that cause pollution and environmental damage, that is, a true environmental protection tax. Taxes such as vehicle fuel tax, energy tax, and noise tax, which are commonly implemented abroad, are virtually not in place. Such taxes should play a central role in an environmental tax system; their absence not only limits the effectiveness of taxes in regulating pollution and environmental damage but also makes it difficult to create a source of revenue dedicated to environmental protection, thereby weakening the role of taxes in safeguarding the environment. (II) Among the existing tax policies related to environmental protection, the relevant provisions are outdated and lack sufficient effectiveness in regulating environmental protection. For example, the amount of tax paid by those subject to the resource tax depends mainly on the conditions of resource extraction, with little regard for the environmental impact of such extraction; as a result, it is not possible to effectively guide and supervise developers to make rational use of natural resources. At the same time, shortcomings such as a too narrow scope of taxation and unreasonable tax calculation bases hinder the effective exertion of its environmental protection role. Although the consumption tax was significantly revised in April 2006, including petroleum products, wooden disposable chopsticks, and solid wood floors within its scope of application, it did not include coal, which is a major source of energy consumption and a key contributor to air pollution. The determination of the tax rates (amounts) did not fully take into account the environmental external costs associated with these forms of consumption. The urban maintenance and construction tax has always been levied as a surcharge; it lacks independence and has a small revenue scale, which can lead to uneven tax burdens and a disconnect between the costs borne and the benefits received. Although the tax on adjustments in the direction of fixed asset investment can influence environmental protection by regulating investment patterns, thereby helping to curb pollution and inefficient use of energy, its collection was suspended starting in 2000. The rate of the urban land use tax is extremely low; in 2005, the revenue generated by this tax amounted to 13.733 billion yuan, accounting for only 0.44% of total tax revenues. Moreover, foreign-invested enterprises, foreign companies, and foreigners are not subject to this tax, and there are numerous exemptions as well. As a result, it has little effect in encouraging the conservation and rational use of land resources in urban areas, serving merely as a minor source of revenue for local governments. The tax on the use of arable land also has a too narrow scope of application (it only covers the use of arable land, without including forests, grasslands, etc.) ； The tax rate is significantly low (the rate currently in effect is still the one set when taxes were introduced in 1987) ； The preferential policies are not properly monitored, leading to serious tax evasion: the distribution ratios are unreasonable, with as much as 80% going to the central government, which results in inadequate collection of taxes and an inability to effectively protect the environment. (III) There are few tax incentive measures in other tax categories, and their forms are relatively simple. In terms of value-added tax, since October 1999, enterprises that use energy-saving technologies and products listed in the **High-Tech Products Catalogue** have been eligible for tax exemptions; since 2001, a system of immediate refund has been in place for products resulting from the comprehensive utilization of resources such as electricity generated from urban household waste ； Since 2001, a half-rate levy has been applied to electricity generated from coal gangue, coal slime, oil shale, and wind power ； As of May 1, 2001, value-added tax was exempted on the sale of waste materials by entities engaged in their recycling. Manufacturing enterprises that are general VAT taxpayers can deduct input tax amounts equal to 10% of the amount indicated on the ordinary invoices for waste materials purchased from such recycling entities. As of July 1, 2001, fees for wastewater treatment, which are collected by water supply plants (companies) on behalf of various authorities and regulatory bodies along with the water bill, were exempt from tax ； A low tax rate of 13% is applied to certain environment-friendly products, such as heating and gas. Regarding corporate income tax, for enterprises that use waste such as wastewater, waste gas, and waste residues as primary raw materials in their production, the corporate income tax can be reduced or exempted for up to 5 years ； For newly established enterprises that handle resources listed in the Catalogue of Comprehensive Resource Utilization, which are waste from other enterprises, corporate income tax may be reduced or exempted for one year upon approval ； For enterprises that specialize in producing the equipment and products listed in the \"Catalogue of Environmental Protection Industry Equipment (Products) Encouraged for Development at Present\" (hereinafter referred to as the \"Catalogue\"), as well as their branch factories and workshops that operate on an independent accounting basis, if their annual net income is 300,000 yuan or less, corporate income tax shall be exempted temporarily ； Enterprises that use domestic equipment listed in the Catalogue may, upon approval, adopt an accelerated depreciation method ； Grants obtained by enterprises that phase out ozone-depleting substance production lines are exempt from taxes. . Regarding foreign-invested enterprises and foreign enterprise income tax, royalties received from foreigners for providing proprietary technology for energy conservation and pollution control can be taxed at a reduced rate of 10%; those with advanced technology and favorable conditions may be exempt from taxes. Additionally, there are also some preferential measures among other taxes. Overall, however, it is mainly limited to tax cuts and exemptions, resulting in a narrow range of beneficiaries and a lack of specificity and flexibility. At the same time, most of them are forms of post-event encouragement, and their effect on pollution control is not significant. Of course, our country also has certain fee-based systems for environmental management, such as pollution discharge fees, compensation fees for mineral resources, and fees for the use of mining areas. However, in addition to common issues such as insufficient rigidity, a narrow scope of application, low fee levels, and failure to take regional differences into account, these fee systems each have their own specific shortcomings. III. Insights from Foreign Tax Policies on Environmental Protection (A) Several Issues to Consider in Environmental Tax Reforms 1. A sound market system is a prerequisite for environmental taxes to be effective. Only a sound market can enable changes in taxation to convey information to economic agents through price fluctuations in a timely manner, allowing those agents to adjust their economic decisions based on these price changes; thus, it becomes possible to use taxation to regulate the economy. Conversely, if the market is imperfect, any problem in any link of the transmission mechanism will render the regulatory intentions futile. Environmental taxes in developed countries are more effective than those in developing countries, and market mechanisms play a crucial role in this. 2. Gradual progress is a fundamental prerequisite for the success of environmental tax reform. On the one hand, it refers to the order in which tax categories are introduced. The conditions for implementing each tax type are distinct, and the extent of implementation also varies. Examples include the sulfur dioxide tax and the carbon dioxide tax within pollution taxes. The former has low implementation costs, is more readily accepted by the public, and is also quite effective in reducing sulfur emissions. The requirements for a carbon dioxide tax are relatively high; to be effective, higher tax rates must be set, but this will weaken the competitiveness of enterprises. Additionally, the transnational nature of pollution must be taken into account, requiring international cooperation. So, implementation usually starts with the former. On the other hand, it refers to the gradual increase in tax rates. In most cases, to achieve significant environmental protection results, tax rates must be set at a relatively high level. However, if the tax rate were increased all at once, the public might not accept it; it could also **reduce the competitiveness of domestic companies and even affect the overall economy, leading to a political crisis. Therefore, the correct strategy should be to start with a low tax rate, and then gradually increase it as pollution control technologies advance, until the optimal level is reached. 3. Starting from reality is the fundamental prerequisite for the effective functioning of environmental taxes. Although many **have established environmental tax systems as an important means of protecting the environment, the tax regulations in most **vary, and even within the same country, environmental taxes differ from one region to another. For example, when it comes to taxing nitrogen oxides as well, Sweden’s tax rate is 43 times that of Italy and 200 times that of France. Although all U.S. states impose a gasoline tax, the tax rates vary greatly from state to state. This shows that, under different circumstances at various times, people’s tolerance for environmental pollution and ecological damage also varies. Therefore, it is necessary to base policies on practical realities and develop feasible ecological tax policies that not only adhere to the principle of efficiency but also serve to protect the ecological environment. 4. Maintaining tax neutrality is an important prerequisite for the successful implementation of environmental taxes. In most Western countries, tax levels are already high; introducing a new tax, especially one such as a environmental tax whose impacts on fairness and competitiveness are controversial, may face significant political and social resistance. Therefore, when implementing environmental taxes, many countries take care to adopt tax-neutral measures that ensure taxpayers receive benefits equivalent to the environmental taxes they pay, so as to avoid increasing the overall tax burden on them and to facilitate the smooth implementation of such taxes. Common measures include returning it directly to taxpayers, allocating it to relevant sectors, or reducing other taxes such as income tax, labor tax, capital tax, and consumption tax. This point should also be taken into account in the future comprehensive environmental tax reform in our country. (II) Several issues to consider in the design of an environmental tax system 1. Diversity of tax measures. From the definition of environmental taxes, their forms of expression are diverse ； Looking at the implementation of environmental taxes in various countries, environmental taxes also include a variety of tax measures. In terms of tax types, taxes on environmental-damaging activities (also known as direct taxes) should be the focus at present, rather than taxes on products (also known as indirect taxes). This is because not all pollutants involved in such activities can be taxed, and the principles of value-added tax do not apply either. Regarding tax-based expenditures, direct tax incentives, accelerated depreciation benefits, tax incentives for research and development in environmental protection industries, and investment tax credits should be used in combination; only through such diverse tax-based expenditures can specific environmental problems be effectively addressed. 2. The suboptimality of tax rates. Theoretically, in order to internalize the overall societal costs, the environmental tax rate should be set at the point where the marginal cost of pollution reduction meets the marginal benefit. In practice, **it is not advisable to set tax rates too high based on full cost pricing; instead, they should be determined taking into account specific target impacts and regional differences.** Because tax rates are set too high, it is possible to cause a suppression of production, forcing society to pay an excessive price in order to achieve \"excessive\" cleanliness. Starting from the control objectives for specific products, differential tax rates should also be designed, such as the generally applied higher tax rate on leaded gasoline and the lower tax rate on unleaded gasoline. At the same time, there is no need for a highly uniform tax rate across the country; regions should be allowed to make slight adjustments based on their own different requirements regarding environmental quality, thereby resulting in certain differences in tax rates. (III) Several issues to note in the implementation of environmental taxes 1. The use of revenues from environmental taxes. The revenues generated from environmental taxes are generally used in two ways: either they are allocated specifically for certain environmental protection activities, that is, used for their intended purpose, or they are incorporated into the general budget revenues. The advantage of the former is that, first of all, it has a high level of acceptability. Informing taxpayers that the taxes they pay are used entirely for activities related to environmental improvement, or for helping those groups most affected by the new tax, can help secure support for it. Secondly, when environmental taxes are still in their infancy, have low tax rates, and fail to achieve relatively ideal environmental goals, a system that allocates funds specifically for this purpose helps to improve the environment. Environmental taxes included in the general budget are generally used to establish compensation schemes in order to offset the potential regressive nature of such taxes and ensure fairness. Tax reforms in OECD countries such as Denmark, Sweden, and Norway adopt this approach; for instance, when a carbon dioxide tax is imposed, the principle of tax neutrality is followed, and the revenue collected is returned to businesses by reducing the amount of social insurance taxes they have to pay, or by funding efforts to control pollution or install facilities for pollution prevention. But this is mainly due to the higher overall tax burden on these high-income groups, which is why “income neutrality” is emphasized. China’s national conditions are quite different from these; the forms of fiscal revenue are not yet standardized, and the overall tax burden is not excessive. Therefore, this approach of neutralizing revenue should be considered in the long term, while in the short term a system of earmarked funds should still be adopted. 2. Levels of environmental tax administration. Environmental issues include both regional problems as well as problems that span multiple regions or the entire country, and even international issues. Therefore, it is necessary to carry out design at both the central and local levels. From a central perspective, it is necessary to establish evaluation criteria for environmental conditions in various regions, as well as differential tax rates tailored to different environmental conditions. The management of cross-regional environmental issues within the country should fall under central oversight, and for issues involving international cooperation, a variety of joint measures should be adopted. At the same time, local authorities should be granted **certain autonomy in taxation, but this must be strictly regulated with clearly defined limits. 3. Coordination between environmental taxes and other environmental policies. Different regulatory approaches have their own distinct characteristics, and macro-regulation, as a whole, requires the organic coordination of various such approaches. Such as the combination of tax measures and regulatory measures: regulatory measures provide the essential “support” for the stimulating effect of environmental taxes (by establishing emission standards, technical standards, etc.), while tax measures serve as a useful and necessary complement to command-and-control systems. Another example is the combination of tax measures and fee-based mechanisms: Environmental taxes in Western countries generally include various fees and charges related to the environment, and this is because such fees are simpler and more flexible to implement. When it is necessary to adjust the collection rates in response to changes in pollution levels, a fee-based approach is more suitable.