API firms that pollute will pay under new Chinese tax law

By Gareth Macdonald

- Last updated on GMT

Chinese API firms that pollute will have to pay a tax to local Government rather than a fee per discharge under newly introduced legislation.

The Environmental Protection Tax law – which was proposed in 2016 – came into effect in January.

Under the regulation​, manufacturers releasing “taxable pollutants” will have to pay local Government a tax based on units discharged. Failure to pay will result in fines.

The law states that, “This Law is formulated in order to protect and improve the environment, to reduce pollutant emission, and to promote the construction of ecological civilization​.”

It replaces the previous “pollution discharge fee” system introduced in 1979, under which local environmental authorities collected admin fees from manufacturers based on the volume of pollutant discharged.

The idea is that switching to a tax and localising oversight will encourage manufacturers which pollute to revise their practices.

According to the state owned China Daily​ newspaper, the previous fee scheme brought in CNY22bn ($3.4bn) in 2017.

China pollution

The tax is likely to affect China’s active pharmaceutical ingredient (API) industry.

In recent years, various studies​ have suggested pollution from Chinese drug ingredients plants is contributing to the spread of antimicrobial resistance.

In 2015​, SumOfUs accused a number of Chinese API manufacturers of polluting the environment by improperly treating wastewater.

The pressure group said poor environmental regulations and the reliance on national rather than local enforcement meant that many API plants in China were releasing pollutants.

It also said Western drug firms’ demand for cheap actives was exacerbating the problem.

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