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the taxes of China can be divided into central taxes (that is, those due 2.2
to the Central government in their entirety), local taxes (that is, those
due to the local governments in their entirety), and those shared by the
central and local governments (with the distribution ratio varying from
tax to tax). Table 2.6 is a summary of the revenues from different taxes
in China in 2011. It shows that the central government’s tax revenue in
the year 2011 stood at RMB 4,863.1 billion, which is RMB 7,525 billion
more than the RMB 4,110.6 billion of the local governments, reflecting
an advantage of the central governments in terms of the tax revenue. It
follows that, in an effort to increase the funds of the local governments
in developing the low carbon economy, there is a need to green or
innovate in the types of taxes.
The tax revenue of the local governments in China, first of all,
derives from the taxes shared with the central governments. These taxes
include three types of taxes: firstly, the taxes related to the production
and operation activities, namely, the business tax and value added
tax.4 These taxes cover, relatively, a wide range of sectors and their tax
rates are generally speaking, universal. China is now implementing a
policy of deducting or exempting the value added tax for some low
carbon industries and products, but in terms of the local governments’
revenue, it is rather difficult to increase the tax revenue of the local
(and central) governments by reforming or adjusting these taxes for
the special purpose of low carbon growth (e.g., raising the value added
tax rate for some sectors with high level of carbon intensity). Also, the
feasibility of such a measure is low, both in the short and medium
term. Second, there are taxes related to income, namely, the personal
and corporate income taxes. China is now implementing an income tax
deduction or exemption policy for enterprises in certain sectors, such
as the energy conservation and environmental protection and clean
energy sectors. This policy can effectively promote the development
of the low carbon economy and low carbon cities. However, from the
perspective of providing effective and additional funds to the local
governments for a low carbon economy, the feasibility is relatively
low. Third, another source of taxes is related to the use and sale of
land, including the city maintenance and development tax. These taxes
cover a relatively smaller range of population groups and economic
sectors and are mostly directly related to the use and sale of land in
4 China is now experimenting with the practice of changing business tax into
value added tax for the transportation industry and a part of the modern
service industry in eight provinces or municipalities directly under the central
government, such as Beijing and Shanghai.
Chapter 2 Innovative Financing for Low Carbon Development 87
to the Central government in their entirety), local taxes (that is, those
due to the local governments in their entirety), and those shared by the
central and local governments (with the distribution ratio varying from
tax to tax). Table 2.6 is a summary of the revenues from different taxes
in China in 2011. It shows that the central government’s tax revenue in
the year 2011 stood at RMB 4,863.1 billion, which is RMB 7,525 billion
more than the RMB 4,110.6 billion of the local governments, reflecting
an advantage of the central governments in terms of the tax revenue. It
follows that, in an effort to increase the funds of the local governments
in developing the low carbon economy, there is a need to green or
innovate in the types of taxes.
The tax revenue of the local governments in China, first of all,
derives from the taxes shared with the central governments. These taxes
include three types of taxes: firstly, the taxes related to the production
and operation activities, namely, the business tax and value added
tax.4 These taxes cover, relatively, a wide range of sectors and their tax
rates are generally speaking, universal. China is now implementing a
policy of deducting or exempting the value added tax for some low
carbon industries and products, but in terms of the local governments’
revenue, it is rather difficult to increase the tax revenue of the local
(and central) governments by reforming or adjusting these taxes for
the special purpose of low carbon growth (e.g., raising the value added
tax rate for some sectors with high level of carbon intensity). Also, the
feasibility of such a measure is low, both in the short and medium
term. Second, there are taxes related to income, namely, the personal
and corporate income taxes. China is now implementing an income tax
deduction or exemption policy for enterprises in certain sectors, such
as the energy conservation and environmental protection and clean
energy sectors. This policy can effectively promote the development
of the low carbon economy and low carbon cities. However, from the
perspective of providing effective and additional funds to the local
governments for a low carbon economy, the feasibility is relatively
low. Third, another source of taxes is related to the use and sale of
land, including the city maintenance and development tax. These taxes
cover a relatively smaller range of population groups and economic
sectors and are mostly directly related to the use and sale of land in
4 China is now experimenting with the practice of changing business tax into
value added tax for the transportation industry and a part of the modern
service industry in eight provinces or municipalities directly under the central
government, such as Beijing and Shanghai.
Chapter 2 Innovative Financing for Low Carbon Development 87
