We find the negative consequence of levy to environmental productivities. Therefore,
it seems reasonable to conclude that the levy system needs to be re-considered and we point out
several problems of the current system in the following areas: 1). Enforcement of environmental
laws is limited and policies and firms’ environmental managements are insufficient. For
example, the levy rate is less than the average cost of pollution abatement partially because the
levy fees are not indexed for inflation, and, for state-owned enterprises, they can be included
under costs and later compensated through price increase or tax deductions (Sinkule and
Ortolano, 1995). 2). Smaller enterprises tend not to pay levy though they share significant rate
of total industrial outputs. 3). The cost of installing pollution abatement facilities is usually not subject to financial assistance from the commercial banks.
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