"Our company's tax credits are about hundreds of millions of yuan, mainly for the tax credits faced during the peak period of project construction from 2018 to 2021." On March 16, a financial person in charge of an environmental protection company told Economic Observer.com .

The problem of tax credits and tax refunds faced by the environmental protection industry is about to be resolved. The government work report on March 5 proposed that comprehensive consideration should be given to providing cash flow support for enterprises, promoting consumption and investment, and vigorously improving the VAT refund system. This year, a large-scale tax refund will be implemented for the remaining tax. Focus on supporting the manufacturing industry, and comprehensively solve the problem of tax refunds in industries such as manufacturing, scientific research and technical services, ecological environmental protection, electricity and gas, and transportation.

The full name of the retained tax refund is "VAT tax refund preference", that is, the "input" value-added tax that cannot be deducted now but is reserved for future deductions will be refunded in full in advance.

The above-mentioned environmental protection company is one of the larger companies in the industry, and the company expressed its expectations for this year's tax rebate policy. However, the above-mentioned financial leaders also believe that there are still some difficult problems to be solved at the policy level.

"For example, the contradiction between 'Announcement 2' in 2020 and 'Announcement 40' in 2021. 'Announcement 2' requires that taxpayers who have obtained VAT credits and refunds shall no longer apply for immediate VAT levy. The policy of immediate withdrawal, first levy and then return (refund) policy. 'Announcement No. 40' requires that from March 1, 2022, after meeting the applicable conditions of the relevant environmental protection emissions and the levy and retire policy, the levy can be refunded and tax-free. It also means that if the tax refund is carried out, it is no longer possible to enjoy the policy dividend of immediate refund.” said the above-mentioned person in charge.

PROBLEM

In 2015, "No. 78" changed the value-added tax in the environmental protection industry from tax exemption to immediate refund. In 2020, those who require a tax refund cannot be refunded immediately. From March 1 this year, the environmental protection industry will be exempted from taxation. Returning to the era of exemption, the tax policy of the environmental protection industry has undergone several important changes in the past few years.

The above-mentioned person in charge of finance told reporters: "For environmental protection enterprises, most environmental protection projects adopt the franchise model or PPP model, with an operation period of 20 or even 30 years. It is possible to choose immediate refund upon collection, rather than the option of remaining tax refund. As far as we know, in order to choose tax exemption, one must first meet the conditions for immediate refund upon collection. Enjoy the preferential policy of tax refund.”

"Announcement No. 2" refers to the Announcement No. 2 of 2020 of the Ministry of Finance and the State Administration of Taxation (hereinafter referred to as "Announcement No. 2"), which provides a 60% tax refund for business input tax (the current policy stipulates that the maximum tax refund ratio of input tax credit is 60% %), that is, "taxpayers who have obtained VAT credits and refunds shall not apply for the VAT refund immediately after collection or refund (refund) policy after collection."

Prior to this, in April 2019, the Ministry of Finance, the State Administration of Taxation, and the General Administration of Customs jointly issued the "Announcement on Deepening Value-Added Tax Reform Policies" No. 39 of 2019 (hereinafter referred to as "Announcement No. 39"), which clearly stated that the The VAT credit tax refund system at the end of the period is extended to the whole industry, that is, starting from April 1, 2019, the incremental input tax credit for six consecutive months is greater than zero, and the incremental input tax credit for the sixth month is not less than 500,000 yuan, taxpayers whose tax credit is A or B can return 60% of the above-mentioned incremental input tax to the taxpayer.

The above-mentioned person in charge of finance told reporters that although the above-mentioned tax rebate policy has been promulgated and used, due to the restrictions of "Announcement No. 2", the company has not obtained tax rebates for a large number of residual credits during the construction period. That is to say, for environmental protection companies, a large amount of tax credits during the construction period are basically deducted in the first few years of the operation period. This also means that even if you choose tax exemption later, you will not be able to enjoy the tax exemption policy in the previous years.

In December 2021, the "Announcement of the Ministry of Finance and the State Administration of Taxation on Improving the Value-Added Tax Policy for Comprehensive Utilization of Resources" issued by the Ministry of Finance and the State Administration of Taxation Announcement No. 40 of 2021 (hereinafter referred to as "Announcement No. 40") made the sewage treatment business, garbage The treatment business, sludge disposal business, and reclaimed water business have returned to the tax-free era. However, "Announcement No. 40" requires that after meeting the applicable conditions of the relevant environmental protection emissions and the policy of immediate refund, one can choose between immediate refund and tax exemption.

In fact, after the introduction of the policy, the person in charge of finance will not be able to save the tax refund in the early stage, and the issue of tax exemption later has been communicated with the competent department. He told reporters: "What the competent authority means is that environmental protection enterprises cannot enjoy the benefits of early tax credits and tax refunds, and they need to apply immediate tax refunds or tax exemptions in the later stage. In this way, the actual situation can only choose to pass the early input tax of the project through the immediate collection. After the refund and deduction are completed, the tax exemption can be applied, and the project construction period does not enjoy the tax refund policy, which cannot alleviate the dividend effect of the company's cash flow pressure."

"Under normal circumstances, the tax credits during the construction period will not be deducted until the fourth or sixth year, and some may even enjoy the tax-free policy until the seventh year. If the tax credits during the construction period cannot be deducted, It is necessary to transfer out the retained tax, which directly increases the amortization of assets and affects the company's profit and loss. The cash flow equivalent to the investment used by environmental protection enterprises has been retained and occupied for many years. Environmental protection enterprises including us are facing The financial pressure has not been relieved." The above-mentioned financial person in charge said.

He told reporters that on the whole, the current value-added tax policy in the environmental protection industry lacks a detailed rule that can connect relevant documents in series, so companies can only keep communicating with the competent authorities about policy standards.

 "DOCUMENT NO. 78"

In the opinion of the above-mentioned financial leaders of environmental protection enterprises, the industry's VAT problem stems from the "No. 78 document" issued in 2015.

In 2015, the Ministry of Finance and the State Administration of Taxation issued the Catalogue of Preferential Value-Added Tax on Products and Labor Services for Comprehensive Utilization of Resources (Cai Shui [2015] No. 78, referred to as “Document No. 78”), proposing labor services for sewage and garbage treatment, reclaimed water and sludge treatment, VAT has been levied since 1 July 2015.

According to this regulation, sewage, garbage and sludge treatment services will be refunded 70% after payment of tax, that is, 30% of the value-added tax is required; recycled aquatic products will be refunded 50% after payment of tax, that is, 50% of the value-added tax is required.

The issuance of "Document No. 78" brought a huge shock to the environmental protection industry.

In 2015, Zhao Lijun, chairman of Boten Environment, publicly stated that most of the sewage and waste treatment industry is franchising. Enterprises generally invest in construction through bank loans. In the early stage of operation, they have to operate with debt, and they can only make profits in the next few years, and they are guaranteed capital and small profits. The state originally implemented the policy of three exemptions and three half reductions for public infrastructure projects (ie, income tax is exempted for the first three years and halved for the next three years), and the VAT exemption has played an important role in promoting the development of the industry. Therefore, the promulgation and implementation of Circular 78 will have a huge adverse impact on the environmental protection industry.

On August 29 of the same year, the 16th meeting of the 12th National People's Congress Standing Committee held a joint group meeting to inquire about the report of the NPC Standing Committee's Law Enforcement Inspection Team on the inspection of the implementation of the Water Pollution Prevention and Control Law of the People's Republic of China. When answering questions, the then Minister of Finance Lou Jiwei said that the formulation and implementation of "Document No. 78" should promote market-oriented and professional transformation, and this is the purpose. In addition, when this policy was introduced, the finance and taxation companies conducted extensive research and believed that they should follow the direction of promoting specialization.

At the same time, Lou Jiwei also said, "At present, the two voices are in favor of experts and enterprises with market-oriented operation and professional operation. They both agree and believe that they are in line with the direction. There are some complaining, mainly municipal units. , because they do not operate professionally, there is no need to issue value-added tax invoices, they are directly eliminated, and they enjoy the tax-free policy for a long time. These units are still not very adaptable to policy adjustments. "

Since then, the Environmental Chamber of Commerce of the All-China Federation of Industry and Commerce has successively put forward suggestions that attention should be paid to the tax burden of the environmental protection industry. In September 2015, the Environmental Chamber of Commerce submitted the "Suggestions on Improving the Value-Added Tax Policy for the Sewage and Waste Treatment Industry". During the two sessions in 2017, the Environmental Chamber of Commerce submitted the "Proposal on Improving the Preferential Tax Policies for the Environmental Protection Industry".

Ma Hui, secretary general of the Environmental Chamber of Commerce, told the Economic Observer.com that although it has been more than six years since the "No. 78 document" was issued, problems such as the separation of rain and sewage, the imperfect municipal pipeline network, and the handling of enterprises facing excessive water intake are still in varying degrees. Existing, it is still difficult to ensure 100% compliance with emission standards.

"Especially, the document stipulates that as long as a company is fined more than 10,000 yuan, it will not enjoy tax rebates within three years, which will cause difficulties in production and operation of the company. At the same time, there are still problems such as insufficient compensation and arrears in service fees in some places. Said that the accounts receivable of sewage treatment continues to remain high, and the cash flow pressure is huge. In addition, the time limit for the approval of the local finance and taxation departments is relatively long. In practice, the tax refund is only processed every quarter or half a year. During the period, it needs to bear about 5%-6% of the short-term financing cost to supplement the working capital. These factors will make the environmental protection enterprises with low profits even worse." Ma Hui said.

A finance and taxation person who has a good understanding of "Circular 78" told reporters: "The reason for the formulation of "Circular 78" was because there were some risks of fraudulent tax refunds in the actual implementation of VAT in the comprehensive resource utilization industry. The main reason was that the resources at that time The comprehensive utilization of tax rebates is carried out in an intermediate chain of value-added tax, which also leads to the upstream and downstream industries in various ways to place the tax burden on this part of the tax rebate.”

Regarding the "enterprise fine of 10,000 yuan" mentioned by Ma Hui, the above-mentioned finance and taxation experts believe that although some enterprises feel that the environmental protection penalty is unfair, from the perspective of finance and taxation, there is no such standard line.

With the issuance of "Document No. 78", the impact gradually emerged.

A government investment and financing person told reporters that at that time, a sewage treatment plant was exempted from value-added tax during the construction period, and was subject to value-added tax during the operation period. This was due to the reduction of investors' reasonable expected income due to system or policy changes. Communicate with the Water Authority to adjust the price. Therefore, when we calculate the price, we generally consider the problem that the tax cannot be deducted during the construction period, and the design is deducted in installments during the operation period. However, there is also a problem that the value-added tax rate during the construction period is 11%. The tax rate for post-operational services is 6%, and the instalment deduction means that it will take longer. ” said the above-mentioned government investment and financing source.

The above-mentioned person in charge of finance told reporters: "From tax exemption to immediate refund, there have been a lot of problems of tax credits and refunds. Our company has accumulated hundreds of millions of yuan in tax credits during this period."

SUGGESTION

With the introduction of a series of favorable policies to support the real economy in recent years around the "tax cut and fee reduction", things have gradually turned around.

In December 2021, the promulgation of "Announcement No. 40" brought the sewage treatment business, garbage treatment business, sludge disposal business, and reclaimed water business back to the tax-free era. According to this policy, starting from March 1, 2022, after meeting the applicable conditions of the relevant environmental protection emission and tax refund policy, you can choose between tax refund and tax exemption.

However, how to choose between the tax rebate policy and the above preferential policies still has a huge impact.

The above-mentioned financial person in charge said, "The semi-public, semi-market nature of the environmental protection industry determines that the profits of this industry are meager, and whether the relevant support policies are fully applicable is particularly important for the healthy development of the environmental protection industry. The construction cycle of related projects such as sewage business and waste treatment business is very important. It usually takes two to four years, and there is no cash inflow during this period. The above 'Announcement 2' has resulted in a large amount of input tax being deposited during the construction period of the project, and the tax refund policy cannot be applied, which further increases the financing gap of the company's projects. increased cash flow pressure.”

He gave an example to reporters: an environmental protection company's annual input tax credit is assumed to be 500 million yuan. Affected by "Announcement No. 2", there is 500 million yuan (500 million yuan × 60%) of input tax that cannot be refunded. Combined with the company's project financing Calculated with a comprehensive interest rate of 5%, the annual increase in financing cost is 15 million yuan.

The person in charge of finance suggested that legal entities that operate sewage treatment business, garbage treatment business, sludge disposal business, and reclaimed water business should be lifted from the restrictions of "Announcement No. 2". Tax-free policy dividends.

"The environmental protection industry has the nature of social public service and strong public welfare, and the main body of responsibility is the local government. The high starting point of taxes and project capital costs has brought a greater burden to local governments, operating enterprises and end users, and is not conducive to The entry of social capital." said the above-mentioned person in charge of finance.

经济观察网 记者 杜涛

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