International Law

An Environmental Tax Is Coming To China And My Hair Is Just Fine.

By Dan

I went to Grinnell College in Grinnell, Iowa. Grinnell, Iowa is a tiny town in the middle of Iowa farm country, which is itself in the middle of the United States' farm belt. Iowa has more pigs than people. I never met anyone at Grinnell remotely involved in farming and, in fact, probably more Grinnell students came from New York City than anywhere else. I recall having only one friend there from Iowa, Bill Stowe. 

Stowe was from a town so tiny, Nevada, Iowa, it made Grinnell look big. Stowe loved to play the role of hick at the college, but he was really nothing of the sort. His father was a college professor and Stowe was (and apparently still is) one of the most politically savvy people I have ever known. He would talk of becoming senator from Iowa and many of us believed (and still do) that would be possible.  

Back then, and still today, I have never been a big fan of taxes, but always believed the best taxes were those that tax in proportion to the extent to which the party being taxed is themselves taxing society. In other words, I like taxes proportionally levied against individuals and companies for the harm they are inflicting or to the services they are securing. So I have always been a big fan of a BTU tax. Bill Stowe knew this.

So one day, Stowe and I decided we would venture into the town of Grinnell (something I would do maybe only once or twice a semester) because we both needed hair cuts. We went to the one barber in town and while I was on the chair, Stowe asked me my opinion regarding gas taxes and I went off (as he knew I would) on how that was one of the few taxes I liked.

Now one is NOT supposed to like gas taxes in Iowa because the large farms there require big tractors and big farm equipment and those things run on gas. Well to make an already way too long story short, the guy cutting my hair did not appreciate my "East Coast" views on this and he gave me a completely unrequested and unwanted butch cut, which was not the style at all back then. That was my last Iowa haircut, as after that I would wait out the semester to get my hair cut in the friendlier confines of my hometown. 

But my views on things like BTU taxes never wavered and one of my favorite taxes is a pollution tax. Do not ask me to explain exactly how such a tax will work as I am only talking theory here, but if I were king,

I bring all of this up because though China has been talking of such a tax for years, that talk in high places has escalated to the point where I believe it will happen. The Chinese media are reporting that the Ministry of Finance, the State Administration of Taxation and the Ministry of Environmental Protection will be jointly seeking to impose a pollution tax and pushing for that to occur as part of the next five year plan. 

I am not big on predicting the laws China is going to enact, I do see this one coming. Right now, China is trying to stop high-polluting factories on an ad-hoc basis. Just this week, Beijing ordered 2,087 high polluting, high energy factories to close. On the FDI side, I am always telling my clients that if their proposed China WFOE is high techhigh job, as opposed to high pollution/high energy usage, their chances of a quick and relatively easy governmental acceptance are much greater. A pollution tax would be far less random, far more efficient. 

Iowa, do you hear me?

Whose with me on this?

Full post as published by China Law Blog on August 09, 2010 (boomark / email).