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  • PRD in Perspective

    Improving Environmental Performance and Enhancing Competitiveness

    PRD Council Dr Daniel Yip

       The Mainland Environmental Protection Tax Law, as ratified by the Standing Committee of the National People’s Congress in 2016, comes into force on 1 January 2018. In 2015, the Federation of Hong Kong Industries (FHKI) submitted a string of suggestions to the Legislative Affairs Office of the State Council regarding the Environmental Protection Tax Law (Draft for Comments). We emphasised that when compiling emission standards, the relevant authorities should consult the industry and take technological limitations and enterprises’ capacity into account. If new standards are to be implemented, there should be a grace period long enough for enterprises to get prepared. We also suggested the authorities should step up efforts to promote the new legislation and provide financial support to enterprises to encourage them to manufacture in an environmentally friendly way.

       Following the promulgation of the Interim Provisions on Administration of the Discharge Permit in 2016, the Ministry of Environmental Protection has gradually implemented the pollution discharge permit system. Under the new regulatory regime, there are different treatments for different industries and different pollutant-discharging enterprises within the same industry. The permits set specific limits on the amount and concentration of each pollutant that may be emitted, and enterprises without a license will be forbidden to discharge any pollutants. The Mainland authority has made a considerable effort to improve transparency by establishing a clear framework of environmental protection regulations that enterprises should be able to comply with. 

       It is always difficult and painful for enterprises to adapt to new regulatory changes. In the past, many local governments set their own sewage charges. They may even decide whether to reduce or exempt these charges. In early years, the Guangxi Government has tried to attract foreign investment by exempting factories from sewage charges. However, in the long run, the new regulation should have a positive impact on enterprises’ production efficiency. Given the heavier the pollution, the higher the cost, enterprises are compelled to improve their technology, strengthen management, lower energy consumption, and thus reduce pollution.

       Both the broader and existing business environment in which the Hong Kong manufacturers operate demand them to enhance environment performance. In the past 50 years, world leaders have signed over 500 international agreements that advocate sustainable development, protecting the Earth and efficient use of resources. Today, most big companies are committed to reporting their environmental and social impacts and continuously improving their environmental performance. The Mainland needs to bear its responsibility to improve the global environment. Of course, enterprises should also take responsibility for their impact on society, which is the key to sustainable development. 

       To control rising environmental compliance costs, enterprises are advised to take advantage of the exemptions and reduction arrangements set under the Environmental Protection Law and ascertain whether tax associated with their pollutants could be exempt or reduced. Pollutants that are temporarily exempt from the tax include, inter alias, pollutants emitted from lawfully established, centralised urban sewage and domestic waste treatment facilities as long as the amount of emitted pollutants does not exceed the national or local standard; and solid waste comprehensively utilised by the taxpayer in compliance with the national or local standard.

       In addition, enterprises can enjoy a reduction of environment protection tax for:

    (a) 50 per cent reduction if the concentration value of air and water pollutants is less than 50 per cent of the national and local pollutant emission standards; and

    (b) 25 per cent reduction if the concentration value of air and water pollutants is less than the abovementioned standards by 30 per cent.


    Dr Daniel Yip

    PRD Council Chairman


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