Legislation to replace pollution charges with an environmental tax is expected to become law within the year, marking an important change to the way China's natural environment is protected.

The Draft Environmental Protection Tax Law will likely be submitted to the National People's Congress, the country's top legislature next month, next month.

The bill further defines the ‘upper limit’ of the tax rate set forth in the Environmental Protection Tax Law (Draft for Comments), the Economic Information Daily reports. Under that draft, the standard tax amount is basically the same as the current standard pollution charge, but the ‘upper limit’ will be up to local governments based on local conditions. The draft also stipulates that if the ‘upper limit’ reaches three or more times the standard rate, it must be submitted to the State Council, China's cabinet, for approval.

Tax law experts argue that the effective implementation of the environmental tax will depend on successful collection and management. So far, that has been carried out by environmental protection departments, while the environmental tax will be levied in an innovative manner, which the law describes as: “declared by enterprises, levied by tax administrations, coordinated by environmental protection departments, with information sharing.”