Shanxi's taxation authorities are using taxes as a tool to guide environmentally friendly and high-quality development in the North China province.

Statistics from the Shanxi Taxation Administration show that the province collected 1.13 billion yuan ($177.8 million) in environmental protection tax during the first 10 months of this year, decreasing 7.87 percent from the same period in 2020. The water resource tax collected reached 4.44 billion yuan during the same period, growing 16.94 percent year-on-year.

Officials at the administration said environmental protection tax and resources tax are the major means that the taxation authorities use to guide environmentally friendly and resource-conserving growth.

The two tax items are correlated with each other, according to the officials.

Rising costs resulting from the resources tax can drive enterprises to improve their efficiency and economy in using resources, and therefore reduce discharges and emissions.

Shanxi began to levy environmental protection tax in January 2018 and resources tax in September 2020.

"The growth rate of levied water resources tax began to drop one year after it was announced," a provincial taxation administration said. "We are expecting a decrease in this tax collection in the near future, as the drop in environmental protection tax signals a downward trend."

The drop is also a result of enterprises' willingness to reduce discharges and emissions as the amounts serve as a basis for the amount of tax collected, officials said.

In addition, enterprises that perform well in environmental protection and resources conservation can enjoy tax reductions or even exemption. This is another reason for the drop in environmental protection tax collected this year.

Dongxin Machinery, based in the city of Houma, for instance, is one of the beneficiaries of the tax system.

"In the past, our company was the subject of frequent measures including halts of operations and fines as a result of our inability to meet environmental requirements," said Yang Shengjie, an executive of the company. "So it was very difficult for us to make profits."

He said the company began to see changes in 2018 after it invested more than 40 million yuan to upgrade its facilities for cleaner and higher-efficiency production.

"We have seen a steady decrease in paid environmental tax over the past three years and we were finally removed from the list of heavy-polluting enterprises," Yang said.

The executive said its business revenue reached a record high of 160 million yuan in the first three quarters of this year. Its profit surpassed 10 million yuan, increasing more than 100 percent from the same period last year, according to Yang.