What benefits does tax incentives bring to third-party governance enterprises?

What benefits does tax incentives bring to third-party governance enterprises?

On March 20th, the Premier of the State Council presided over a State Council executive meeting and decided to levy corporate income tax at a reduced rate of 15% on third-party enterprises engaged in pollution prevention and control from January 1st, 2019 to the end of 2021. This year is a crucial year for fighting the battle against pollution prevention and control. In order to better support this work, the State Council has put forward practical measures. The environmental protection industry, including third-party governance enterprises, is a typical policy driven industry. Tax incentives help directly reduce the burden on enterprises and enhance the enthusiasm of private capital investment. So, what is the current development situation of the third-party governance industry in China? What more details do we need to improve in order to truly implement the tax reduction and exemption benefits this time? Our reporter interviewed Dong Zhanfeng, Deputy Director of the Environmental Policy Department of the Environmental Planning Institute of the Ministry of Ecology and Environment.

The introduction of incentive policies, including tax incentives, is conducive to optimizing the tax structure of enterprises, encouraging them to accelerate technological innovation, mobilizing the investment enthusiasm of social capital, and effectively promoting industry development, providing guarantees for the fight against pollution prevention and control.

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China Environment News: This year is a crucial year for winning the battle against pollution prevention and control. What is the significance of introducing tax incentives at this time for completing the battle task?

Dong Zhanfeng: To win the battle against pollution prevention and control, we cannot do without the support of the environmental protection industry. The environmental protection industry is a typical policy driven industry, and we must fully leverage the guidance and incentive role of policies. At present, the battle against pollution prevention and control has entered a critical stage, and it is necessary to increase support through policy innovation breakthroughs. This tax incentive is an important lever, which is a significant benefit for the development of the environmental protection industry.

A considerable number of third-party governance enterprises in China currently belong to small and medium-sized enterprises, facing high financial pressure and low risk tolerance. Moreover, third-party governance enterprises have not yet formed a reasonable and stable profit model, and most pollution control projects have long cycles and face many uncertain factors, resulting in significant investment risks. The introduction of incentive policies, including tax incentives, is conducive to optimizing the tax structure of enterprises, encouraging them to accelerate technological innovation, mobilizing the investment enthusiasm of social capital, and effectively promoting industry development, providing guarantees for the fight against pollution prevention and control.

China Environment News: What is the current development situation of the third-party pollution control market in China? What are the prominent issues?

Dong Zhanfeng: In 2014, the General Office of the State Council issued the "Opinions on Promoting Third Party Governance of Environmental Pollution", vigorously promoting third-party governance. In 2017, the former Ministry of Environmental Protection issued the "Implementation Opinions on Promoting Third Party Governance of Environmental Pollution", which provided overall guidance and requirements for the implementation of third-party governance and clarified specific measures for promotion. In recent years, various regions have successively introduced policies and documents to promote the third-party governance model, and actively encouraged the use of financial, credit and other methods to guide and support the implementation of third-party governance of environmental pollution, hoping to improve the efficiency and level of environmental pollution control.

Currently, third-party environmental pollution control in China is mainly applied in two key areas: the construction and operation of environmental public facilities and the pollution control of industrial enterprises. The former has formed a "government enterprise cooperation" model, such as the government entrusting a third party to construct and operate sewage and garbage treatment facilities; The latter has formed the "enterprise cooperation" model, in which polluting enterprises and companies specializing in providing environmental services sign environmental service contracts to purchase specific environmental services, and both parties share the saved emission reduction costs.

Overall, implementing third-party environmental pollution control is the trend, which helps to improve pollution control efficiency and promote the rapid development of the environmental protection industry through specialized, large-scale, and market-oriented operation of pollution control. However, the third-party governance industry in China is still in the process of development and is not yet mature. There are still many problems to be solved in terms of institutional improvement, clear rights and responsibilities, and financial security. Especially in terms of legal support, it is necessary to establish a responsibility attribution and accountability mechanism, improve management methods, and clarify responsibility attribution.