On October 23, the State Taxation Administration of China announced via its WeChat account that in order to fully implement the spirit of the 20th National Congress of the Communist Party and subsequent central plenums, as well as to enhance the management and protection of water resources, the Ministry of Finance, the State Taxation Administration, and the Ministry of Water Resources have jointly released the “Implementation Measures for the Pilot Reform of Water Resource Tax” (referred to as the “Measures”). This reform will officially commence on December 1, 2024, transitioning the water resource fee to a tax system. What adjustments are made in the policies compared to previous pilot reforms of the water resource tax? The State Taxation Administration outlines the following four key points.
Firstly, the tax system has been improved. The “Measures” further clarify the scope and subjects of the water resource tax collection. It specifies the reporting and tax payment requirements for taxpayers who are subject to multiple tax rates for water extraction. Additionally, it strengthens the positive incentive role of tax preferences and aligns the collection location of the water resource tax with relevant provisions of the resource tax law, moving it from the place of production to the location of the water intake.
Secondly, local authorities have been granted expanded powers. The “Measures” allow for the introduction of new tax incentive policies at the local level, enabling reductions and exemptions. It simplifies the tax rate standards for the water resource tax, giving local governments more flexibility when determining actual tax rates. It also permits local authorities to establish methods for assessing and collecting the water resource tax for specific water usage.
Thirdly, the tax collection mechanism has been enhanced. The “Measures” clearly outline the responsibilities and obligations of taxpayers in relation to tax declarations. It also strengthens the collaborative mechanism for information sharing between tax authorities and water administration departments, aiming to improve the efficiency of water resource tax collection.
Lastly, the relationship between pricing and taxation has been clarified. The “Measures” define the connection between the water resource tax and the supply price of water. Urban public water supply enterprises will be treated as taxpayers for the water resource tax, and there will be a separation between the price of tap water and the tax. This approach aims to encourage relevant enterprises to implement measures to control and reduce water loss.
